After College: What If You Can’t Afford Your Monthly Student Loan Payments?

What if you are or soon will be making payments on your Federal Direct Loans on your Federal Direct Loans (FDLs), but you can’t afford the amount you’re scheduled to pay?

You’ve got a serious problem! The day after you miss some or all of a monthly payment you’re delinquent on your FDL debt. If you don’t pay the delinquent amount within 90 days, you’ll be reported to all three national credit bureaus, which’ll really mess up your credit rating.

And if you’re still delinquent after 270 days, you’re in default.” Now the government’ll inflict some nasty penalties on you — e.g. you’ll be required to pay the full amount of your debt immediately, the Treasury Department’ll take any federal benefits or tax refunds you’d otherwise get to reduce that debt, and your wages will be confiscated for the same purpose.

But there’s good news! You have ways to reduce your monthly payments. Check them out and get into the one that’s best for you immediately upon realizing your monthly payments are too high:

  • Switch Repayment Plans: You’re probably on the 10-year Standard Repayment Plan. It’s great if you can afford it because it’s the quickest and, in the long run, least expensive way to repay your FDL debt. But it typically requires the highest monthly payments of all federal repayment plans. You can switch to another plan that’ll lower those payments — some of them by tying them to your family size and income. Use the Federal Student Loan Repayment Estimator to calculate your payments and the number of months you’ll make them under each plan for which you’re eligible.
  • Consolidate Your FDL Debt: You can also borrow an FDL Consolidation Loan to replace all your existing federal loans, and depending on what you owe you can get a longer (12-30 year) repayment period. While this’ll cost you more to eliminate your debt, it’ll immediately and significantly lower your monthly payments.
  • Deferment: Need to temporarily postpone your monthly payments? Consider getting a deferment. You qualify for a deferment by meeting specific conditions associated with economic hardship; graduate fellowship, in-school status, active military duty (current or recent), rehabilitation training, or unemployment. If you qualify, you’re entitled to a deferment for a certain time period, and Washington won’t charge interest on your subsidized FDL debt during that period.
  • Forbearance: Forbearance lets you totally postpone or reduce your monthly payments for a set number of months. There are “mandatory forbearances” for those in AmerCorps, the Department of Defense Student Loan Repayment Program, medical or dental internships or residencies, national guard duty, high student loan debt burden situations, and the Teacher Loan Forgiveness program. There’s also a “general forbearance” for borrowers changing jobs, paying off medical expenses, experiencing financial difficulties, and enduring other problems acceptable to their loan servicers. The downside? Washington charges interest on your subsidized FDL debt while you’re forbearance, then adds whatever interest is unpaid to your loan principal when forbearance ends.

If your monthly payments are or will be unaffordable, pick your best option for reducing them and contact your loan servicer to get it — right away!

Need help analyzing your options, contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com to arrange a consultation. We never charge borrowers for consulting with them!

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