The best way to repay your student loans is to make regular payments. Skipping payments can incur penalties like fees or a lower credit rating. It can also cause you to pay more overall for the money that you borrowed. However, sometimes unexpected events can make it difficult to manage student loan payments. Unemployment, long-term illness, and permanent disability are just a few examples of events that can make paying on student loans challenging.

If you are struggling to repay your student loans, there are ways to get help managing your payments. Never just stop paying on your student loans! Not making payments on your student loan debt can have serious consequences. Instead, recognize that you have options. Your options for repaying student loans will differ depending on whether you have federal or private student loans. You can learn about the difference between federal and private student loans here.

Contact Your Lender
It is important to stay in contact with your student loan servicer and let them know why you are struggling to make payments. You might feel embarrassed or want to keep your situation private, but if you stop making payments without letting your lender know why, there will likely be serious consequences. Instead, if you let your lender know your situation, they may be willing to work with you by adjusting the size of your payments or allowing you to make up a missed payment later. The options available to you will depend on your individual lender and whether you have federal or private student loans.

Change Your Payment Plan 

Federal student loans offer three repayment plans. The default payment plan, known as the standard plan, is designed so that borrowers can repay their loan in ten years. Payments are divided into even, monthly payments that include the principle and interest. However, in some circumstances a different repayment plan can be easier to manage.

The income-driven repayment plan allows borrowers to make payments based on a certain percentage of their monthly income instead of a predetermined amount. This can make repayment much easier for borrowers who begin their careers with unusually low salaries because their payments can be substantially lower than on the standard plan. One downside of income-driven repayment plans, though, is that they lengthen the time it takes to repay your loan, meaning you will pay more interest over the life of the loan.

Another option is the graduated repayment plan. This plan begins with very small monthly payments that will increase every two years. For borrowers who have salaries that will increase at regular intervals, this can be a good way to make student loan payments more manageable.

Borrowers with federal student loans can switch between these payment plans as needed. Simply contact your loan provider and fill out the appropriate paperwork.

Repayment plans for private student loans depend on the individual lender. Each private lender sets their own rules for how their loans can be repaid, how much must be paid at a time, and whether there are penalties for late or missed payments. For this reason, it is important to talk to your own student loan lender to understand your options.

Consolidate Your Loans

For students who have multiple student loans from different lenders, loan consolidation is a way to simplify repayment and become eligible for different repayment plans. Students with federal student loans can apply for the Direct Consolidation Loan, where one lender will pay off all other lenders the student owes and the student will make one monthly payment to that lender until the debt is paid off. Besides convenience, the benefit of student loan consolidation is that once loans are consolidated, students can more easily apply for repayment plans that fit their circumstances. However, in some cases loan consolidation can increase the interest rate on federal student loans, so it is important to research carefully and speak with your lender to determine if this is the best option for you.

Unlike with federal student loans, sometimes borrowers who take out private student loans can get a better interest rate and lower monthly payments by consolidating their loans. However, this is often dependent on factors such as the total amount of the consolidated loan, the student’s credit score, the student’s payment history on the loan, the original interest rate on the loan, and all other debt the student may be carrying. Before consolidating private student loans, it is a good idea to shop around and compare both fixed and variable interest rates that different lenders offer. Rates can vary greatly from lender to lender.

Consider Deferment Or Forbearance

A deferment allows a borrower to temporarily stop making payments on their student loan for a set amount of time. For most types of federal student loan, the government will pay the borrower’s interest on their loans during the period of deferment. This means the borrower will not incur a financial penalty while deferring their payments. Not all borrowers are eligible for deferment, but many hardships are covered by deferments such as undergoing cancer treatment and economic hardship. You may also receive an automatic in-school deferment if you are enrolled in college or career school. Deferment can be obtained by submitting the appropriate Deferment Request form.

Loan forbearance is similar to deferment in that a borrower’s payments temporarily stop, however, interest will still accrue on their loans. Borrowers may continue to make interest payments or interest may be added to the principle of the loan and paid over time. You may be eligible for forbearance if you are facing challenges such as financial difficulties, medical expenses, or changes in employment. You can apply for forbearance through a General Forbearance Request.

While deferment and forbearance may seem convenient, both will lengthen the time until the loan is fully repaid, and forbearance can increase the total amount of money you owe. For this reason, it is better to contact your lender and adjust your payment plan first. Deferment and forbearance should only be considered in the most extreme circumstances and for as short a time as possible. 

Private student loans may or may not be eligible for deferment and/or forbearance. This is at the discretion of the individual private lender. To find out if your private student loan is eligible, contact your lender.

Consider Loan Forgiveness Programs

The Public Service Loan Forgiveness Program allows borrowers with federal student loans to receive loan forgiveness by working at government agencies or qualifying nonprofits. Under this program, borrowers are enrolled in an income-driven repayment plan. After making 120 full, on-time payments, the remainder of the borrower’s debt is forgiven. The federal Teacher Loan Forgiveness Program is a popular example of one type of Public Service Loan Forgiveness Program, but other types of employment can qualify for forgiveness as well. 

This program is only available for borrowers with federal student loans.

Forbearance Through The Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

In March 2020, Congress passed the CARES Act to provide temporary economic relief to those affected by the COVID-19/Novel Coronavirus 19 pandemic. As part of that act, the office of Federal Student Aid has suspended student loan payments, stopped collections on defaulted loans, and set interest rates to 0% until September 30, 2020.

On August 8, 2020, President Trump and the Secretary of Education continued this student loan relief through December 31, 2020.

You can read more about the impact of COVID-19 and the CARES Act on student loans or get answers to common questions by visiting the federal government’s student loan website.

This relief applies only to borrowers with federal student loans. Borrowers with private student loans who have been impacted by the pandemic should contact their private lenders to learn about possible relief options.

Are Private Student Loans Right For Me?

Federal student loans offer many benefits over private student loans. Typically, they carry lower interest rates and offer more flexible repayment options than private student loans. Those benefits matter, especially when unexpected difficulties arise.

However, there are times when federal student loans are not an option or do not fully cover the cost of attending school. In these cases, private student loans can be a good option for hardworking students with big goals. 

But not all private lenders are the same. As a nonprofit lender, Pickett & Hatcher is able to offer competitive, low-cost, private loans to deserving students. The interest and fees borrowers pay on these loans don’t go into our pockets. Instead, this money goes back into our educational fund to help the next class of students attend college, too.