With bills including rent, food, and electricity piling up, student loan payments might be the last thing on your mind. This might seem tempting but actually very dangerous. You have to continue managing the student loans even when you can’t pay them at the moment. Defaulting on these loans after line months of missed payments comes with serious consequences.
You are likely to end having government agents on your heels pursuing you to the grave. This leads to garnishing your wages, seizing your federal benefits, and intercepting your tax refunds. You also risk ending up collecting charges and fees on your student loan. When finding serving your student loans hard, here are options you should consider.
Change the repayment plan
Some federal student loans qualify for income-driven plans that cap the monthly payments at about 10 to 20 percent of discretionary income. This is the difference between income and about 150 percent poverty guidelines of state and family size. There is a possibility for your federal student loan to require zero monthly payments until an increase in your discretionary income. You can use any of the available repayment plans for federal loans including
- Standard repayment plan with a fixed monthly payments
- Graduated repayment plan with payments gradually increasing
- Extended repayment plan with fixed or graduated payments
You have about 10 years to pay the loan when you opt for a standard or graduated repayment plan. A consolidated repayment plan requires about 30 years while an extended repayment plan is about 25 years.
When struggling with paying multiple loans, one of the best loan companies for bad credit can assist you to consolidate the loans. A direct consolidation loan consolidates multiple loans into one. This allows making a single monthly payment. Federal loans can be consolidated without an application fee. Private student loans can’t be directly consolidated. However, when having private and federal loans, consolidation is available for only federal loans.
Consolidating your loans gives you about 30 years to make payment. And, the new monthly payment might become lower than the current payments. However, this exposes you to pay more interest on the loan. Additionally, you might lose particular perks like interest rate discounts and your benefits might be canceled. So, weigh your options before having your loans consolidated.
Contact loan servicer
Avoid letting your federal loan fall by the wayside. Never hesitate to contact your loan servicer promptly on failing to pay your student loan. The loan servicer is the middle man between you and the federal government that gave you money for college. A servicer collects your loan bills and keeps track to check whether you pay them on time. When you fail to pay, contact the loan servicer immediately to discuss options to keep you in good standing with the loans. This protects you from a student loan default.
You can have your federal student loan forgiven through the Public Service Loan Forgiveness Program. However, only those working in public service or other government agencies are eligible to have their loan forgiven after 10 years of making monthly payments. If you have an income-driven payment plan, having your loan forgiven on the remaining balance is only after making monthly payments for about 20 to 25 years.
Sometimes you might fail to pay your student loans when facing financial hardships. Alternatively, you might be unemployed. A good idea is to defer federal loans to about three years. Student loan deferment is a temporary postponing of payments. There is a chance of having the federal government pay the interest on your loans during the deferment period.
This is another solution if you don’t qualify for deferment. Forbearance allows postponing or reducing the payments for about 12 months. The lender might approve you for general forbearance when you have medical expenses or other financial hardship. Alternatively, meeting particular eligibility requirements qualifies you to benefit from mandatory forbearance.
This makes you responsible for interest charges accruing from your federal student loans. You have to continue making payments on requesting deferment or deferment until approval. However, you might not be responsible for paying interest accruing on particular loans throughout the deferment period. Ensure to understand what you are going into before taking the plunge.
Servicing student loans can get stressful. When facing a rough time, the options above can save the day. You can contact the loan servicer to discuss options or talk to a credit repair company to help you consolidate all your loans. Ignoring to take action significantly affects your financial life and puts you at risk of defaulting. This comes with severe consequences including fines and charges. The credit repair agency will come to your rescue to save you from default and put your credit score in good standing.