Students: What To Do If You Can’t Afford Your Student Loan Payment
There are many options available to you should you discover that you cannot afford your student loan payment, the Consumer Financial Protection Bureau says.
These options depend on what type of student loan you took out whether it be a Federal Student Loan or a Private Student Loan.
Here are some of the options that are available depending on the type of loan you took out.
Upon discovering that you are not able to afford your student loan payments, no matter what type of student loan you have is to contact your lender to find out what programs they can offer you to postpone your monthly payment or even reduce it.
This can be achieved by extending the amount of time you will have to repay the loan or enrolling in a payment plan based on your income.
Federal Student Loans
For federal student loans, there are many repayment options available to reduce your payments.
Graduated Repayment plans are lower at first and then increase over time (usually every 2 years) and for an amount that will ensure your loan be paid off within a 10-year time frame.
Extended Repayment is payments that may be fixed or graduated and will ensure your loan is paid off within 25 years.
When it comes to Income-driven repayment programs, plans such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), or Income-Contingent Repayment (ICR) can assist you in being able to afford your monthly payments.
A federal student loan repayment program that adjusts the amount you owe each month based on your income and family size is known as the Income-Based Repayment or IBR.
For those borrowers who have newer federal loans, there is a student loan repayment plan that caps your monthly federal student loan payment at 10% on your discretionary income. This is known as the Pay as You Earn (PAYE) program.
You may also be able to postpone your payments under deferment or forbearance
With a Federal Student loan, you may also qualify for a deferment which is a temporary pause on your payments for specific situations such as active duty military service and re-enrollment in school. The deferment is for a certain defined period of time.
If you are experiencing financial difficulty, a reduction or postponement of your student loan payments is referred to as forbearance.
Private Student Loans
When it comes to Private Student Loans there are no standard options to lower your payments, every lender is different.
There are some lenders who will offer modified repayment plans that are similar to the federal programs, but they are under no obligation to do so.
Your best line of defense when it comes to working with Private Student Loans is to communicate with them your challenges as soon as possible. That way they can work with you to come up with a solution before the loan goes into default.
More Content Like This