Dealing with student loans can be overwhelming. If you are having trouble finding a job or not earning what you thought you would be, simply making the minimum payments can be impossible. Here is what you can do when you can’t make your student loan payments.

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How to Handle Your Student Loans When You Can’t Make Your Payments

  • Determine if there is really no way to make your student loan payments.
    Before you deem it impossible for you to pay your student loans, take a look at your finances. Are there any expenses you can temporarily cut to allow you to pay your student loans? Maybe canceling cable or downgrading your cell phone plan can free up your funds to go towards your student loan debt. Cutting down expenses, taking on a roommate to help you split the rent and utilities, and limiting entertainment costs are all ways you would be able to save more money for your loans. If there is nothing you can sacrifice or cut, can you earn more income? Ask for a raise, get a part-time job, do freelance or contact work, sell your belongings, or brainstorm other ways you can earn more money. Also explore tax breaks for college students and use this extra money to make your payments. But if none of these suggestions are an option or you are struggling to find a job, things are not hopeless, and there are still ways for you to deal with these student loans.
  • Call your lender to find out your options.
    Once you realize you can’t pay your loan, the first step is to call your lender to explain your situation. Then they can inform you of your options. Your options depend on your lender and also the type of loan you have. They may be able to help you come up with a better payment plan based on your income or current financial situation or tell you what else you can do.
  • Apply for a deferment
    Depending on your lender and the type of loan you have, you may be able to apply for a deferment. This means you are deferring, or postponing, your payments for a specific period of time. Applying for a deferment most likely will require paperwork to prove why you are asking for this deferment. If you are unemployed or facing economic hardship, you may qualify. There are certain stipulations for each deferment.

    For example, for an unemployment deferment, you may have to prove you are actively seeking employment and register with an employment agency. For an economic hardship deferment, you need to show that you are in fact working but your income does not cover your expenses. With a deferment, your loans may still be accruing interest. Depending on your lender and the type of loan you have, this deferment will only last a certain amount of time.

    You may also qualify for a deferment if you were called or ordered to active duty military service, a member of the National Guard or other reserve component of the U.S. armed forces, or serving with the Peace Corps. If you are enrolled in school at least half-time, you can receive an in-school deferment. If you are in school, contact your college’s student financial aid office as well as your lender to complete the process for an in-school deferment.

  • Put your loans in forbearance.
    If you are not able to make payments and do not qualify for a deferment for your loans, you can consider a forbearance. You can stop paying on your loan for a certain amount of time, usually a few months and up to 12 months, to stop the loan from heading to default and to a collection agency. This could cost an initial fee, and the loan may be accruing interest while it’s in forbearance. The duration of your forbearance and other specific conditions depend on the type of loan you have and your lender.

    There are two types of forbearance. A discretionary forbearance is when your lender decides to grant you this forbearance because of your financial hardships or an illness. The second type of forbearance is a mandatory forbearance, where your lender will be required to grant you this forbearance. Some of these reasons would include serving in a national service position for which you received a national service award, you are serving in a medical or dental internship or residency program and you meet other requirements, the total amount you owe each month for all the student loans you received is 20 percent or more of your total monthly gross income, you are performing teaching service that would qualify for teacher loan forgiveness, you qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program, and if you are a member of the National Guard and have been activated by a governor but you are not eligible for a military deferment.

    Just like a deferment, this is not an automatic process. You must apply for a forbearance by making a request through your lender. You will most likely need to show proper documentation to prove your request as well.

  • Explore loan forgiveness.
    While it is not easy, exploring the possibility of loan forgiveness is another way to deal with the debt. With loan forgiveness, you work a certain job or volunteer to have a portion of your loans forgiven. For example, you can serve with the AmeriCorps, Peace Corps or other volunteer organizations. Depending on your field, you can sign up to work in an area lacking teachers or medical care professionals.

Things to Remember

  1. Consider loan forgiveness programs carefully. Be sure to fully read and understand any contact you sign. Many times, if you do not complete your service, you need to pay back the money they paid towards your loans. Also, many programs only pay your loans up to a certain amount.
  2. The first step is always contacting your lender to let them know you are having trouble paying your loans.
  3. You absolutely must keep paying your student loans even if you apply for a deferment or a forbearance. You will be notified by your lender that your request has been granted, but this can take a while. If you miss a payment, your loans will become delinquent.

How do you deal with your student loan debt? What advice would you give those who are struggling to make their student loan payments every month?

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