Student Loans: What Options Do You Have if You Can’t Begin Paying Again?

Statement for a Student Loan on a desktop.
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Federal student loan payments are set to resume on May 1 after a two-year pause tied to the COVID-19 pandemic, and many borrowers are not financially ready to make them. A recent report from the Federal Reserve Bank of New York found that a large percentage of borrowers are in danger of defaulting when payments resume.

See: Most Student Loan Borrowers are Not Ready to Restart Payments May 1
Find: Student Loan Pause Saved Borrowers $195 Billion, But Many Will Default When it Ends

Defaulting on student loans can have numerous consequences, ranging from hurting your credit score to being taken to court by your loan provider. Rather than risk defaulting, you should look into other options. Here are a few recommendations from the Debt.org website.

Negotiate New Terms with Your Loan Provider

As Debt.org noted, it’s in the best interest of loan companies to do everything they can to ensure you keep paying. If you let them know your circumstances, they might rework your repayment plan to make it easier for you to afford the monthly payment. Just make sure the plan doesn’t end up costing you an arm and a leg. You don’t want to wind up paying exorbitant interest rates and fees over a long period of time just to get a lower monthly payment.

Save for Your Future

Enroll in an Income-Driven Repayment Plan

Most federal student loan borrowers are enrolled in Standard Repayment Plans, in which the debt is paid off in 10 years. These are the fastest and cheapest way to pay off loans. But you can also opt for Pay As You Earn, Repay As You Earn, Income-Based Repayment and Income-Contingent Repayment plans. All apply to join one of these plans and even move from one to another to meet your needs.

The plans typically involve paying 10% to 15% of your discretionary income, depending on which program you choose. You should see a significant reduction in your monthly loan payment.

Student Loan Deferment or Forbearance

A deferment will let you skip making payments for a set period of time as long as you meet certain criteria, which typically include the following: being enrolled in school at least half-time; being enrolled in a graduate fellowship program; being in an approved rehabilitation program for the disabled; being unemployed and seeking employment; suffering economic hardship; and serving on active duty in the military.

Deferments are also available if you have a Perkins Loan and are a full-time law enforcement or corrections officer or serve in the Peace Corps.

Save for Your Future

With a student loan forbearance, you are allowed to stop making payments for a set period of time or have your payments temporarily reduced. Interest will continue to accrue, however. There are two categories of forbearance: general and mandatory. General forbearances might be granted if you have expensive health problems, or if you meet certain debt-to-income criteria.

Loan servicers are required to grant mandatory forbearance if you meet various conditions, such as serving in a medical or dental internship, serving in an AmeriCorps position for which you received a national service award, or serving as a teacher that would qualify you for teacher loan forgiveness.

Earn Extra Income

If you don’t currently earn enough income to repay your student loan, look into a second job or a side gig to bring in more money. Side gigs can range from doing lawn work in your spare time to being an online reseller or online instructor if you have a particular area of expertise.

See: 22 Side Gigs That Can Make You Richer Than a Full-Time Job
Find: Have Any $200 Quarters Lying Around? It’s Worth Checking Your Spare Change

Save for Your Future

As for second jobs: The Great Resignation has contributed to a massive labor shortage in many sectors of the economy. You might find it especially easy to land part-time jobs at retail chains or hospitality businesses such as restaurants and hotels.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.

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