What To Do if You Can't Afford Your Student Loan Payments

That dreaded student loan bill comes in the mail and you panic. Do you just ignore it because you can't pay it anyway, or is there something you can do? Get some advice on how to proceed if you find yourself in a bind regarding your student loan payments. Schools offering Finance degrees can also be found in these popular choices.


Actions to Take if Having Difficulty Making Payments

College graduates who finish school with student debt can face many challenges in repaying loans. Unemployment, limited earning power and other economic hardships can make paying back student debt seem impossible. There are, however, steps borrowers can take to better cope with loans.

A Heavy Financial Cost

Earning a degree can yield many personal and professional benefits, but going to college may come at a significant cost. Higher education expenses can leave you saddled with a large amount of debt after graduation. In recent years, this challenge has been exacerbated by difficult employment prospects. A faltering economy has made it tough to find any job, let alone positions that pay well enough to allow you to make headway on student loans after graduation.

Like you, many graduates find themselves in dire financial straits and feel hopeless about their chances of paying off a college education. Some even live in a state of denial about the situation, disregarding lenders' attempts to get in contact. This approach may result in loans going into default, which can have catastrophic consequences on one's credit. Fortunately, there are many opportunities for you to reconcile student debt.

Preparing to Address Student Debt

For a first step, you should develop a full understanding of student loan obligations. It's important to know the lender, balance, financial terms and repayment status of each loan. When you have a clear picture of what you owe and under what terms, you're in a better position to make sound decisions about repaying student debt.

Throughout the process of paying off or reconciling loans, you should maintain consistent communication with lenders. It's important that you open all physical and electronic mail, answer phone calls and update contact information with lenders. Lending organizations have an incentive to work with you because they don't want loans to go into default - which is something you should keep in mind as you go about repaying debt.

Steps to Consider

If you're having difficulty making student loan payments, you may pursue a variety of arrangements that can allow you to avoid being late with payments or, worse, defaulting on loans. Here are some options:

1. Restructure loans. You may have monthly payments decreased by extending the life of loans. For example, federal student loans with the standard repayment period of 10 years might be extended to 25 years or another period of time. Private companies may also be willing to extend the life of loans to make it easier for you to make payments. It's important to note that extending the life of a loan is likely to increase the amount of interest you will ultimately pay. Also consider consolidation, but avoid consolidating federal and private loans as that action can cancel government loan forgiveness programs (see #4).

2. Apply for a deferment or forbearance. If you're able to secure a deferment on a loan, you will be excused from making monthly payments for a period of time. A deferment may be granted in response to a specific situation, including unemployment or a return to school. Only certain types of loans are eligible for a deferment. You can seek a forbearance instead if you have non-eligible loans, which is a more flexible alternative that allows you to temporarily cease making payments. Interest continues to accrue on many loans with deferred or forbearance status.

3. Seek alternative repayment methods. Graduated repayment arrangements may allow you to at first, furnish only the interest on student loans with payments increasing over time. This is a good option if don't make a lot at the onset of a career but expect to have increased earnings over time. Income-Based Repayment (IBR), applicable to some federal loans, allows you to make monthly payments on loan obligations that are based on the amount of your income.

4. Capitalize on loan forgiveness programs. If you're enrolled in an Income-Based Repayment plan, you may be able to have loans forgiven or canceled. You can be eligible if you pay under the IBR plan for 25 years and still have an outstanding balance. Loans may also be forgiven after 10 years if you're employed full-time in a public service job. Another cancellation option that you may consider is bankruptcy, but student loans are often exempt from this.

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