What If I Can't Pay My Student Loans?
Tips on managing your student loan repayment --and avoiding the serious consequences of defaulting on your loans.
Avoiding Student Loan Default
If you have more student loan debt than you can comfortably handle, there may come a time when you're tempted to throw up your hands and stop making payments. Not so fast. The consequences of student loan default are harsh -- see What Happens If I Default on My Student Loans -- and defaulting will dramatically increase your debt headaches.
Here are some suggestions to help you stay out of default.
Getting Organized: Strategies for Managing Student Loan Payments
Sometimes people who have enough income to pay off their loans end up in default because of poorly organized records. You can take some simple steps to get your paperwork together and reduce the chances that a loan will fall through the cracks.
Get your papers together. Set up a file for your loan documents and use it. You may want to keep a paper file for documents you receive in the mail and a folder on your computer for electronic documents. Always keep copies of loan forms you sign.
Know your due dates. Find out when your very first loan payment is due, and set up reminders so you don't miss it. Many borrowers default simply because they don't know when their grace period expires. You are required to make on-time payments even if you never receive a bill or notice from the loan servicer.
Learn about repyament options. If it's not too late, explore your repayment options before your loans become due. Of course you will want a plan you can afford, but within those guidelines choose the plan that pays off your loans as fast as possible.
If your lender offers auto-pay, use it. Sign up to pay your loans electronically -- not only will this keep you from skipping payments, it may reduce the interest your owe on your loans. Many lenders offer interest discounts for borrowers who auto-pay their loans.
Use basic financial planning skills to manage your loans. Create and maintain a budget (many people prefer to call it a "spending plan") that you can live with. If you need budgeting help, there are many available resources.
Getting Help: Strategies When You Can't Pay Your Student Loans
If your loan payments are out of your financial reach, there are many options short of default to help relieve the pressure. Here are the main strategies for getting payments under control:
Putting off your student loan payments with deferment or forbearance plans. To learn more, see How Do I Postpone My Student Loan Payments?
Canceling your student loans, if your financial or medical hardships are extreme. For more information, see Can I Cancel My Student Loans?
Discharging your student loans in bankruptcy -- a long shot but not always impossible. For more, see Can I Discharge My Student Loans in Bankruptcy?