Read this article if you’re worried about being able to afford student loan payments and think you might default. Estimated read time ~10 minutes.
If you’ve come to this article you might be uncertain of your financial future. Maybe you can’t find a job, maybe you had unexpected medical expenses, or maybe you overextended yourself when borrowing for college and now are facing down repayment. Whatever brings you to this article take a deep breath, you have options.
Repayable is all about finding the best way for you to repay your student loans. That starts with keeping you in good standing, which means making your payments on time. Your student loans are in default when you’ve failed to make a payment for 270 days if you pay monthly, or 330 days for FFEL loan programs.
Step 1: Contact Your Loan Servicer
The first thing to do is contact your loan servicer to discuss your options. Your loan servicer can help you find the payment plan that makes the most sense for you.
Step 2: Review Your Options
There are a two strategies to help you manage your student loan debt during times of financial hardship. Deferment and forbearance allow you to delay making payments for a period of time. In deferment you don’t make any monthly payments and you don’t accumulate interest on subsidized loans. In forbearance you don’t make any monthly payments but you do accumulate interest on all loans.
The next strategy involves choosing an income-driven repayment plan. Income-driven repayment plans include: Revised Pay as You Earn (REPAYE), Pay as You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). Each plan is slightly different but involve paying 10-20% of your discretionary income and forgiveness of the remaining balance after 20-25 years. Your monthly payment can be very low so may be a better option than deferment or forbearance because you can work toward loan forgiveness.
Step 3: Choose the Strategy That’s Best For You
Picking the strategy that’s best for you isn’t as overwhelming as you might think. You may even be able to enlist the help of the financial aid office of your college.
Step 4: Avoid Common Pitfalls
Don’t be so overwhelmed that you choose to ignore the problem until you’re in default. Default can keep you from loan forgiveness eligibility and ruin your credit. If your student loans aren’t in good standing you could also lose the professional license you earned with your college degree.
Don’t enroll half-time to avoid having to make payments. Your debt is compounding but you might not be earning yourself a higher paying job after the completion of the courses. You’re better off seeking deferment or forbearance or switching to an income-driven repayment plan.
Unlike other types of consumer debt, student loan debt can’t be discharged in bankruptcy. You will have to deal with your student loans one way or another. The easiest way to do that is to start looking at your options at the first sign of trouble. Don’t let your fear of criticism or the unknown keep you from repaying your student loans
What’s your biggest struggle with repayment? Let me know in the comments below or on the Repayable Facebook Page. You can always send me an email jeni@repayable.org and I’ll help you out!
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