Not being able to make your monthly student loan payment (or any payment, really) is one of the daunting experiences that a college graduate or current student can face. Maybe you’re a recent graduate who hasn’t been able to find a job before your grace period ended; maybe you had a job and were successfully repaying your student loans and you’ve since been laid off; maybe you’ve simply had a string of emergencies that have left you cash-strapped and unsure of how to right your ship. Whatever the case, not being able to pay back your student loans is stressful, it can be embarrassing, and, for a lot of people, it can feel like there’s no way out.
But you can’t just not make payments. Simply ignoring your student loans is a surefire way to find yourself in delinquency and eventually default, which can send you to collection, wreck your credit, and haunt you for years to come.
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So what are you supposed to do? What steps can you take to get back on track paying off your student loans?
The good news is this: If you ever find yourself unable to make your monthly student loan payments, you do have a number of options to help get you back on track. Here, we discuss some of the options that you have at your disposal when you just can’t make your payments, organized by the level of financial trouble that you’ve found yourself in.
If you’re only worried about missing one payment…
1. Turn to your emergency fund (if you have one).
If you’ve found your budget over-extended for the month due to some unexpected expenses, hopefully you’ve built an emergency fund that you can turn to in order to fill the gaps. Withdraw the funds, use them to pay your bill, and then once you are on solid footing, make sure you add funds back to your emergency fund to bring it back to a healthy level.
That being said, your emergency fund is designed to cover all of your living expenses when you find yourself in financial need, not just your student loan payments. If you think your financial situation is going to stay rocky outside of just missing one payment, then you should look into the options below to see if they can help you manage your student loan expenses without depleting your emergency fund.
2. Change your payment due date.
Sometimes—it happens to all of us—an expense pops up that throws your budget all out of whack. It isn’t really an emergency, but you find yourself a few hundred dollars short right at the worst time of the month: When your student loan payment is due. If you don’t have an emergency fund to turn to cover the gap, you do have another option: Calling your student loan lender or servicer and asking them to change your payment due date.
Virtually every student loan servicer, and most lenders, will give borrowers the option to change their payment due date once a year. Sometimes you can choose the exact date of the month that you’d like your payments to be due. Other times, you’ll have to choose from some pre-selected options that your lender has designated as due dates (often one option at the beginning, one in the middle, and one at the end of the month). Whatever the case, by changing your payment due date so that it falls later in the month, you may be able to buy yourself enough time to recover financially and make your payment.
This solution does come with two considerations, though.
First, make sure that whatever due date you change to is a due date that you’ll be able to consistently make payments on. If most of your payments come due at the beginning of the month, for example, you may want to look at changing your student loan payment due date to the middle of the month. That way, you’ll have more flexibility in your cash flow.
And second, just keep in mind that pushing your payment due date back may cause you to incur more interest accrual the month that you make the change (since you’re going longer without making a payment). In the grand scheme of things, this isn’t likely to be a huge amount of money—after all, you’re talking about a couple of weeks at most—but it’s still something to bear in mine.
If you’re worried about missing multiple payments…
The two solutions mentioned above are typically good for individuals who are only worried about missing one student loan payment due to difficulties budgeting or smaller unexpected expenses that throw budgets out of whack. But if you find yourself in more serious financial trouble that could lead you to miss multiple payments, the options below are likely to be more helpful.
3. Ask your servicer or lender about your repayment options.
If you’re worried about your ability to continue making your student loan repayments in the long term, then your best course of action would be to look into selecting a new repayment plan. Ideally, this plan would allow you to pay any interest that accrues each month while also paying down your principal.
Exactly which repayment options are available to you will depend on a number of factors. The most important of these will be whether or not your loans are federal or private student loans.
If you borrowed private student loans, then your repayment options will depend on your borrower. Some borrowers do not allow borrowers to change their repayment terms; others do. The only way for you to know for sure will be to call your lender and ask them what options are available to you.
If you borrowed federal student loans, you have a bit more in terms of options. By law, federal student loans come with a number of repayment plans that all borrowers can opt into during repayment. These include:
- Standard repayment: This is the repayment plan you’re automatically enrolled in when you enter repayment. With the standard repayment plan, you’ll make the same payment each month for the life of your loan. Standard repayment typically takes 10 years.
- Graduated repayment: In graduated repayment, you’ll make lower monthly payments at first. Your payments will gradually increase over time (presumably, as your income grows). Graduated repayment typically takes 10 years.
- Extended repayment: In extended repayment, you can choose between making fixed payments each month (like standard repayment) or graduated repayment. But whereas standard and graduated repayment happen over 10 years, extended repayment can take up to 25 years. This means you can have much lower monthly payments (making your payments more manageable) but you’ll end up paying much more in interest over the life of the loan.
Federal student loans also have a number of options for income-based repayment, where your monthly payment amounts are calculated based on your income level. These options include:
- Revised Pay as You Earn (REPAYE)
- Pay as You Earn (PAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
Each of these income-based repayment plans has its own eligibility requirements and specifics that you should consider, so be sure to read up on your options before selecting one to move forward with.
4. Consider placing your loans in deferment or forbearance.
Sometimes life throws you such a curveball that even opting into a new repayment plan won’t be enough to get you back on track with your student loan payments. If you ever find yourself completely unable to make even reduced payments, then another option you have at your disposal would be to place your (federal) student loans into either deferment or forbearance.
Deferment and forbearance are both essentially the same thing: A period of time during which you are not required to make payments on your student loans. Though similar, there are a few key differences between deferment and forbearance that you should keep in mind.
First is eligibility requirements. As a matter of law, borrowers of federal student loans are entitled to defer their loans for up to three years if they meet certain eligibility requirements (including, for example, an inability to find work, economic hardship, or enrollment in the military, Peace Corps, or some other programs). Forbearance, on the other hand, is not guaranteed. It is granted at the discretion of your student loan servicer.
Second is how interest is treated.
In both deferment and forbearance, your student loans will continue to accrue interest, and if you cannot afford to pay off the interest that has accrued, it will be capitalized. But if you’ve got subsidized federal student loans (Perkins, Direct, or Stafford) then deferment is your best bet if you meet the eligibility requirements: Any interest that accrues on these loans during deferment is paid for by the federal government. Interest that accrues on subsidized loans during forbearance, though, is not paid by the federal government, making it a costly option.
Whenever possible, you should avoid deferment and forbearance because of the potential they have of causing your student loan balances to increase. Opting into a repayment plan that allows you to make interest-only payments would be a smarter bet, because it will at least allow you to keep your balance from growing.
And what about private student loans? Unfortunately, deferment and forbearance aren’t guaranteed options if you have private loans. Many private lenders do offer forbearance options to borrowers who find themselves in tough economic situations, though, so be sure to contact your lender to discuss your options.
5. If your financial stress is caused by a natural disaster, look into administrative forbearance.
Are you unable to make your student loan payments because you’re in the middle of a natural disaster? Luckily, you have some options available to you.
The most helpful among those benefits (at least as they relate to student loans) is likely to be administrative forbearance, which is a period of up to three months where you do not need to make your student loan payments.
It’s important to note, though, that during administrative forbearance—like in traditional forbearance—your loans will continue to accrue interest, which will ultimately increase the amount of money you pay over the life of the loan. Still, taking some time off from making student loan payments can make it easier to settle your finances elsewhere, so if it makes sense for you, you should take advantage of it.
If you do decide to opt into administrative forbearance, consider making interest-only payments if you can. These payments will be less than your normal monthly payment and will help you avoid interest capitalization once the forbearance is over.
Even if you would not normally qualify for forbearance, if you are in a FEMA-declared disaster zone you should be eligible for administrative forbearance. You should contact your student loan lender or servicer directly to request the forbearance. You may be automatically enrolled in administrative forbearance in some cases, so if you decide that you can continue to make payments and don’t want to participate, call your lender or servicer to check the status of your loans.
If the forbearance ends and you are still unable to make your payments, you can request an extension, but whether or not you are granted this extension will be dependent on your servicer or lender. Federal student loan borrowers are more likely to get an extension than private borrowers.
6. Consider consolidation (or refinancing).
If you have multiple federal student loans and find yourself struggling to make payments, student loan consolidation may offer some relief.
Essentially, consolidation is the process of taking multiple student loans and combining them into a single new loan. This can make it easier to keep track of all of your student loans (since one loan is easier to keep track of than many loans) and may also allow you to make substantially lower monthly payments.
Whether or not your monthly payments change will depend on the terms of your new loan. When applying for consolidation, you can choose repayment terms up to 30 years to pay off your new loan. The longer your term, the less you’ll pay each month—which can make it easier to manage your payments—but the more you’ll pay in interest over the life of the loan.
It’s also important to recognize that you may lose certain benefits by consolidating your student loans so be sure you understand the pros and cons of consolidation, and speak to your servicer, before moving forward either way.
If you have private student loans, you, unfortunately, cannot consolidate your student loans. You may be able to refinance your existing student loans to a new student loan with more favorable terms (including lower interest rates and monthly payments). To qualify, you’ll typically need your loans to be in good standing and have a solid credit score, though.
7. Think about student loan forgiveness.
If you borrowed federal student loans, you may be eligible for student loan forgiveness in certain situations, which could come in really handy if you find yourself unable to make payments after diligently doing so for a number of years. Types of forgiveness include:
- Teacher Loan Forgiveness: If you’ve worked as a teacher full-time at a low-income school, back-to-back, for five years, you may be eligible to have a portion of your federal loans forgiven, though PLUS loans are not included.
- Public Service Loan Forgiveness: This program forgives whatever balance you still owe on your Direct Loans after you have made 120 “qualifying monthly payments” while working full-time for a qualified governmental or non-profit employer. FFEL Program Loans and Perkins Loans cannot qualify for this type of forgiveness.
- Perkins Loan Forgiveness: If you carry Perkins Loans and you’ve worked in certain high-needs fields (for example, as a teacher, the armed forces, law enforcement, in the medical field, or in certain volunteer capacities) a portion of your Perkins Loans may be forgiven. How much depends on the type of work you’ve done and how long you’ve done it.
Similarly, you may also qualify for student loan discharge under certain circumstances (for example, if your school closes before you graduate, you become totally disabled, or you die).
It’s important to realize, though, that qualifying for student loan discharge and forgiveness can be notoriously difficult, and the eligibility requirements vary based on the type of loan you borrowed, how long you’ve successfully made payments, and your employment history. You can learn more about discharge and forgiveness here.
The Bottom Line
If you find yourself unable to make your student loan payments, it is incredibly important that you call your lender or servicer so that they can walk you through the options available to you. From changing your due date to opting into a different repayment plan to deferring, forbearing, or consolidating your student loans, you have options. Your servicer or lender is there to help, but they can only help if they know that you need help.