|I'm having trouble paying my student loans. What should I do?|
The first thing you need to do is to make your lender aware of your situation. Confronting the problem is probably the most beneficial thing you can do.
If you are having financial difficulties or are otherwise unable to pay your student loans, you can temporarily postpone your loan repayment by requesting either a deferment or a forbearance from your lender. Although they are often seen as the same, deferment and forbearance are different options.
With a deferment, your lender grants you a reprieve from your loan payments based on a specific condition such as unemployment, a temporary disability, a return to school, or a similar situation. Your lender can tell you which conditions qualify for deferment. In most cases, the federal government pays the interest on your loan so the balance does not increase during the deferred period.
With a forbearance, your lender grants you — at its discretion — permission to reduce or stop your loan payment for a period of time. Interest continues to accrue on your loan, and you'll still have to pay off both the accrued interest and the loan when you resume your payments. Although a deferment is preferable, a forbearance is often easier to get because it's not governed by the type of your loan or the date you obtained it.
A deferment and forbearance are usually granted for a six-month period. But there is usually a limit to the number of times they are granted during the course of your loan. You'll need to apply for them with the appropriate form from your lender. You may also need to reapply periodically to maintain your eligibility.
Another option if you are having trouble repaying your student loans is to investigate different repayment options. The standard ten-year repayment plan is not your only option. For example, under an extended repayment plan option, you extend the number of years you have to repay your loan. The result is a lower monthly payment, which might help you out of a financial jam now. However, keep in mind that you will pay more interest over the life of the loan due to the longer term. Or, consider one of the federal government's income-driven repayment programs, or IBR. Under these programs, monthly student loan payments are based on discretionary income and family size, and borrowers can have their remaining debt forgiven after a certain number of on-time payments.
Finally, you can try to have your student loans permanently canceled. This means that you don't have to repay them at all; the loans are permanently removed from your financial obligations. However, cancellations don't come easily. They are usually granted based on a specific condition, such as the borrower's death or permanent disability, or based on certain types of employment, such as teaching in needy areas. Contact your lender to see what the rules are for loan cancellation.
If you fail to pay, you'll be in default on your student loans. Nonpayment can have a negative impact on your credit score, and the government can garnish your wages and intercept your tax refund for repayment of federal loans.