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Can’t Pay Your Student Loans? Here’s What to Do

When you can’t afford to pay your student loans, it can be a huge stressor. What happens if you don’t pay your student loans at all, or stop paying them? How can you afford to make payments if your income doesn’t change?

These are common questions that students and graduates ask all the time. Here’s what to do if you find yourself unable to make student loan payments:

COVID-19 Student Loan Forbearance: When will it end?

Last Updated: December 16th, 2021

The U.S. Department of Education Office of Federal Student Aid has been actively monitoring the coronavirus/COVID-19 pandemic. At this point, the COVID-19 Emergency Relief for federal student loans will end on January 31st, 2022.

This means that these previous relief measures will no longer be in effect
after January 31st:

  • Suspension of loan payments
  • 0% interest rate
  • Stopped collections on all defaulted loans

Discuss options with your loan servicer

It’s easy to panic, procrastinate, or simply ignore your student loans when you can’t make your payments. When you feel any of these starting to happen, it’s a good time to contact your loan servicer. The federal government and most private lenders assign every borrower a student loan servicer, a.k.a. someone who acts as the middleman between you and the federal government that loaned you money. They collect your student loan bills and keep a record of if you’ve paid on time.

You can find out who your student loan servicer is by logging into your My Federal Student Aid account. They can also help you with switching repayment plans, certifying for forgiveness programs, and signing up to postpone loan payments.

Consider changing your repayment plan

If keeping up with your federal student loans is keeping you up at night, you might want to consider changing your repayment plan. Most federal student loans are eligible for income-driven plans, or perhaps your servicer will elect the 10-year standard student loan repayment plan for you. Keep reading to learn which plan might be right for you — it’s not worth losing any more sleep over.

Different types of repayment plans

Federal loans have a few different repayment options — standard, graduated, and extended repayment. The repayment period for standard and graduated payments are up to 10 years for individual loans or up to 30 years if your loans are consolidated. And extended repayment plans go up to 25 years. We’ll go over this in more detail below, but keep in mind:

  • Standard repayment plans have a fixed monthly payment
  • Graduate repayment plans begin at a lower amount and gradually get higher
  • Extended payment plans let you choose whether your payments are fixed or graduated

Standard repayment plans

The standard repayment plan is the basic repayment plan for federal student loans. It saves you money over time because although your monthly payments are fixed at a higher rate than other plans, you’ll pay it off in the shortest amount of time. (Remember, payments are fixed for up to 10 years and between 10 and 30 years for consolidated loans). Because of this, you’ll pay less interest over the life of the loan.

Graduated repayment plans

If your income is relatively low right now but you expect it to grow over time, you might consider the graduated repayment plan. It works by starting with lower monthly payments that increase every two years. Payments are made for up to 10 years for all loan types, except consolidated loans. The payment will also never be less than the amount of interest that accrues between your payments.

Income-driven repayment plans

When your federal student loan payments are too high compared to your income, consider repaying your loans under an income-driven repayment plan. If your income qualifies as low enough, your payments could even be as low as $0 per month. And most federal student loans are eligible for at least one income-driven repayment plan. They work by setting your monthly payment to an amount that is intended to be affordable based on your income and family size. There are four different types of income-driven repayment plans: Revised Pay As You Earn Repayment Plan (REPAYE Plan), Pay As You Earn Repayment Plan (PAYE Plan), Income-Based Repayment Plan (IBR Plan), and Income-Contingent Repayment Plan (ICR Plan).

Pay As You Earn Repayment Plan (PAYE)

The PAYE Plan (Pay As You Earn Repayment Plan) is an income-driven repayment plan that maxes out your federal student loan payments at 10% of your discretionary income and forgives your remaining balance after 20 years of repayment. It’s a great option for anyone who doesn’t expect their income to increase much over time, has graduate school debt, or for married couples who both have incomes. 

Revised Pay As You Earn Repayment Plan (REPAYE)

The REPAYE Plan (Revised Pay As You Earn Repayment Plan) is also an income-driven repayment plan that caps federal student loan plans at 10% of your discretionary income. It also forgives your remaining balance after 20 or 25 years of repayment. Compared to other income-driven options, REPAYE offers the best combo of low monthly payments and availability to borrowers. It’s a great option for people who are single, have low graduate school debt, expect high-income potential, and don’t qualify for other income-driven repayment plans. 

Consider student loan refinancing

Student loan refinancing has the possibility of saving borrowers money by replacing their existing student loan debt with a new, lower-cost loan through a private lender. To qualify, you typically need a credit score in the high 600s (though, ideally higher), a steady income, and a co-signer who qualifies if you can’t meet the first two requirements.

It’s free to refinance student loans, and you may be able to decrease your monthly payment or pay off your debt faster with this option. But, it’s important to do your research before committing!

Make sure you’re getting a better interest rate and that you’ve chosen the right company for your financial situation. And our advice – probably don’t refinance while the government forbearance is in effect. (Remember that date from earlier, Sept. 30, 2021?). The COVID-19 Emergency Relief Flexibilities will be extended through at least September 30, 2021, so take advantage while you can.

If you do decide to proceed, keep in mind you’ll lose access to income-driven repayment plans, loan forgiveness programs, and other federal perks.

Look into deferment or forbearance options

When you’re unable to repay your student loans due to economic hardships or having trouble finding work, deferment or forbearance might be an option for you.

With deferment, you won’t have to make any payments for up to three years. However, you won’t be making any progress towards forgiveness or paying back your loan either.

Forbearance can postpone or reduce your payments for up to 12 months if you meet certain eligibility requirements. Both options require the borrower to continue making payments until their request is approved.

See if you’re eligible for student loan forgiveness

Another viable option that might be available to you is student loan forgiveness. This means you’re no longer required to make payments on your loans due to your job. There are different types of forgiveness, including but not limited to:

  • Public Service Loan Forgiveness (PSLF). This is available for employees of government or nonprofit organizations after you have made 120 qualifying monthly payments during a set repayment plan while working full-time.
  • Teacher Loan Forgiveness. If you’re a full-time teacher for five complete and consecutive years in a low-income elementary, secondary school, or educational service agency, you may qualify for forgiveness of up to $17,500 on your direct loan. 
  • Closed School Discharge. If you’re enrolled in a school that closes either while you’re enrolled or soon after, you could be eligible for discharge of your federal student loans.


What if I can’t pay my student loans?

Of course, this question likely crossed your mind. If you fail to make a payment on your federal student loan, it can, unfortunately have serious negative impacts on your finances. The first time you miss a payment, your loan becomes delinquent, which is another way of saying you’re behind on your payments. Your loan will stay that way until all your payments are up to date, and each missed payment could result in a late fee.

If you’re more than 90 days past due, your delinquent loan will be reported to credit bureaus. This will negatively impact your credit score, thus making it harder to open a new credit card, borrow money, or even rent an apartment.

If your federal loan is more than 270 days past due, it enters what is called default, the failure to meet the legal obligations of a loan. This could lead to extreme consequences such as wage garnishment or other legal action.

What if I never pay my student loans?

There’s a big difference between “I can’t pay” and “I’ll never pay” my federal student loans.

If you never pay, this will lead to default and damage your credit history. Default means you are in breach of the legal contract you agreed to with your lender. When a loan is in default, a series of negative consequences can ensue, including wage garnishment, withheld tax refunds, garnishment of Social Security payments, late fees, growing unpaid interest, and collection costs. In other words, all things you want to avoid. Don’t be afraid to seek free financial help if you need it!

Abigail Masterson

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