One of the difficulties afflicting many consumers right now comes with student loans. Often, student don’t realize how much they really have in loans until they start making payments. And in an economy climate where good jobs are scarce, it is increasingly difficult to make those student loan payments as required.
So, what happens if you find yourself in a position in which you can’t pay your student loans? The good news is that you have options. Here are some of your possible choices if you find yourself unable to make your student loan payments:
Income-Based Repayment
One of your best options, if you can make some form of payment, is to apply for the government’s income-based repayment (IBR) plan. With an income-based plan, your loans are consolidated, and you are issued a 25-year loan. Your payments are based on your income, so you don’t have to worry as much about affordability.
The downside to the IBR plan is that you might end up paying more over the life of your loan, since you pay for so much longer. Overall, you could pay thousands more by the time the 25 years is up. Also, you have to periodically re-submit your information so that your payments can be adjusted to reflect an increase in your income.
Deferment
Another options is deferment. When you have your student loan payments deferred, you can put off paying principal and interest. In some cases, as when you have a subsidized loan or a Perkins loan, the government will pay your interest during deferment.
If you aren’t eligible to have the government pay your interest during deferment, your interest will continue to accrue, even though you don’t have to make the payments. Additionally, at the end of the deferment period the accrued interest might be added to the loan total, increasing the amount that you end up repaying.
Forbearance
With forbearance, you can stop making payments, or make reduced payments, for a period of up to 12 months. With forbearance, your interest continues to accrue — no matter what kind of loan you have. As with deferment, any interest that has continued to accrue might be capitalized at the end of your forbearance. That means that you could end up paying more overall.
How to Request Help with Your Student Loans
With IBR, you apply through the government’s Direct Loans program. The government then handles the consolidation of your federal loans, including loans like Stafford loans that were in effect before the Direct program took effect.
If you want forbearance or deferment, you need to request it through your loan servicer. You might not qualify for either of these options, although there are some cases in which lenders are required to grant you forbearance — but you have to meet certain conditions.
It’s also worth noting that there are special programs that can help you discharge your student loans a little earlier. Some careers can lead to partial student loan forgiveness, and there are organizations, such as the military and AmeriCorps, that can help you pay off your student loans.
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