August 3, 2007
I can’t afford my student loan payments – what do I do?
So you can’t afford your current student loan payments? Maybe you just graduated, maybe you lost your job – there are a myriad of reasons.
Here are your options
- Consolidate! You’ve just graduated with a lot of debt and can’t afford to pay it all. You probably want to consolidate your loans. This will lengthen the repayment period, and you’ll pay more interest over the life of the loan, but it can shrink your monthly payments by quite a bit. Also, the longer repayment periods aren’t a bad thing necessarily as federal loans can be paid early with no prepayment penalty!
- Deferment! Student Loan Deferment is when your loan company give you a temporary reprieve. Essentially, you are allowed to stop paying monthly payments for an agreed-upon period of time. For this, you MUST call your loan company and you must qualify for this. For example, you’ve gone back to school, lost your job or work for the Peace Corp. Read this article from the US Department of Education to learn more.
- Forbearance! Student Loan Forbearance is for those who have difficulty repaying their loans but don’t qualify for deferment, which has stricter guidelines. Payments are postponed or reduced temporarily, and interest accrues while you are in forbearance. You MUST call your loan company for this also. Read this article from the US Department of Education to learn more.
Yes, this talks a lot about calling your loan company. No, the loan company is not the enemy here. I mean, really – lets think about this logically – they don’t want your loans to go into default any more than you do as it hurts their bottom line. It’s in their best interests to help you through your time of need and keep you on a repayment schedule of some sort. If you hit the skids, call your loan company, they may be more help than you ever imagined.
And DO NOT let your loans go into default, it will haunt you for years!!!!