What To Do When You Can’t Pay Your Student Loans

At some point, I think we all have had the month when you sit down to look at your finances and realize that there is no freaking way that you can afford to pay your student loan payment.

For me, the first time that I had this feeling was after getting laid off a few years ago. Unfortunately, I have been in that situation on more than one occasion.  I have even been employed and earning a decent income but still unable to pay the $900+ expected by my student loan lenders.

If you are experiencing this feeling, know that you are not alone.

The worst thing about student loans is that it is virtually impossible to get rid of them in a bankruptcy or other means of discharge.

If you have private student loans, those can be included in a bankruptcy but not the standard Federal student loans.

This means that you are obligated to pay your student loan until you die.  That’s pretty dire, right?

Well, when you are experiencing problems paying, I can tell you first hand that the WORST thing that you can do is just totally avoid phone calls from Sallie Mae or whoever your lender happens to be. It just makes things worse. Instead, you need to call the lender to let them know about your payment difficulties. Why? Because they can work with you.

Ask For Student Loan Modification

Did you know that you might be able to get the terms of your student loan changed? It is called loan modification and it is something that you might be able to do with your private student loans.

Don’t have private student loans? Lucky you! However, you cannot modify the regular Federal student loans. Fortunately, there are other options for you.

Change Your Payment Plan

When you student loan repayment begins, the default payment plan is the standard one. Financially, this is the best option, but it is not the one with the lowest payment.

So, if you cannot make your payments, inquire with your lender about changing plans and lowering those payments.

You might be able to make interest-only payments, which would substantially lower your monthly amount due on the student loans.

There is even an income based repayment plan (IBR) that requires your Federal income tax form and then your monthly payment amount is based on your income. The best part? After 25 years of payments, the balance of your student loans is forgiven!

You may also qualify for the Pay As You Earn repayment plan, which is pretty great. This one is even better than IBR because loans are forgiven after 20 years AND the government pays the interest on the loans if you cannot afford to based on your financial information.

Request Student Loan Forbearance and Deferment

The more common types of payment relief that most people have heard of is student loan payment deferments and forbearance.

With these, you basically get to stop making your student loan payments for a period of up to one year. However, interest will continue to accrue on those loans, which means that the loan balances will increase.

Not everyone qualifies for deferment or forbearance. In most instances, these are used when people have some type of economic hardship, such as losing a job.

And if you have private student loans, then lender will likely charge you a fee to go into forbearance or deferment.

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