Life can throw some unexpected curves at you. And when this happens, you often wind up with unwelcome expenses. In these hectic moments, it might seem impossible to think about your federal student loan payments, but that’s exactly what you should do.
If you are having trouble making your loan payments, you should remember that federal student loans offer many flexible repayment options. It might seem easier to ignore your student loans, but that won’t make them go away. In fact, defaulting on a federal student loan (not making payments for more than 270 days) can have serious consequences. If your loan defaults:
- your credit score will be negatively impacted, which could prevent you from qualifying for a car or home loan and may jeopardize your future employment opportunities;
- your loan may be placed with a collection agency, and you will be responsible for paying the collection fees; and
- your paycheck or federal income tax refund could be withheld to help repay your debt.
But, this doesn’t have to happen to you. When you’re struggling to make your student loan payments, you should contact your loan servicer. Your loan servicer can discuss your options for lowering or temporarily postponing your payments.
Here are some options you might want to consider:
- Switch your repayment plan: You may be able to change your repayment plan to one with lower monthly payments. Just beware that lowering your monthly payments may result in paying more over the life of the loan. You can compare your payments under each repayment plan using our Repayment Estimator.
- Ask for a deferment or forbearance:A deferment or forbearance allows you to temporarily postpone or reduce your federal student loan payments. You may qualify for a deferment or forbearance for a variety of reasons, including financial/economic hardship, unemployment or military service. It’s important to note that, in most cases, interest will continue to accrue on your loans when they are in a deferment or forbearance status (except for subsidized loans in deferment).
- Consolidate your loans: If you have multiple federal student loans, you may consider combining them into one loan. A Direct Consolidation Loan often results in a lower monthly payment, but does extend the amount of time you have to repay your loan which causes you to pay more over the life of the loan. Find out more about the pros and cons of loan consolidation.
For more information about options for successfully managing your loans, visit https://studentaid.ed.gov/repay-loans or contact your loan servicer.
Tara Marini is a communication analyst at the Department of Education’s office of Federal Student Aid.