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7 Options if You Can’t Make Your Student Loan Payments

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In a Nutshell

Student loan default can have serious financial consequences and wreck your finances. If your student loans are coming due and you can’t afford the payments, don’t panic. You can take steps to avoid defaulting on your student loans. We’ll outline some of your options in this article.

Written by the Upsolve TeamLegally reviewed by Attorney Andrea Wimmer
Updated December 31, 2021

One out of every 10 Americans has defaulted on their student loans, and over a million student loans are defaulted on each year. Student loan default can have serious financial consequences and wreck your finances. If your student loans are coming due and you can’t afford the payments, don’t panic. You can take steps to avoid defaulting on your student loans. We’ll outline some of your options in this article.

Student Loan Default Can Have Serious Consequences

You must start paying off federal student loans six months after you either graduate, drop below half-time enrollment, or quit school. After this six-month grace period, you must start making monthly loan payments. Because of financial hardships, many student loan borrowers can’t afford to make the payments when the grace period ends. If you can’t make payments you risk being delinquent on the loan, and eventually, falling into default. 

A loan is considered delinquent (but not yet in default) as soon as a payment on the loan is past due. Being in default status depends on the type of loan you have. For example, most federal student loans are in default once payments are at least 270 days late. Some private student loans are in default after 90 days of missed payments. Once a loan is in default, the lender can take certain actions to collect the debt. This is why defaulting on a student loan, especially federal student loans, can have serious consequences. 

Defaulting on a student loan can seriously harm your credit score, and collections agencies may harass you about the debt. Also, with federal student loans, the federal government can garnish your wages, levy your bank accounts, and withhold federal payments, including tax refunds and Social Security payments. To collect your student loan debt, a lender can also bring a lawsuit against you, place liens on any property you own, and foreclose on your house if you own one.

When a student loan goes into default, the loan is accelerated. This means the entire loan balance, including the interest, becomes immediately due and payable. Also, student loans that go into default are generally no longer eligible for deferment or forbearance. You should do everything you can to stay current on your student loans. If you can’t make your payments, you do have some options to keep from defaulting on the debt, but it’s important to act before your loan falls into default status.

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There Are Ways To Prevent Defaulting on Your Student Loan Debt

Once you know you can’t make your student loan, you need to take action. There are ways to prevent defaulting on your loan, but you need to be proactive. If you wait too long, you may lose some of your options. 

Contact Your Student Loan Servicer Immediately

As soon as you know you won’t be able to make your payment, you need to contact your student loan servicer and explain your situation to them. It’s actually in your lender’s best interest to help you find a way to repay your loans. That’s because lenders only make money when you pay back what you owe. They typically lose money if they hire a collections agency to collect the debt. When you contact your loan servicer, explain your situation and ask them if you can work something out to repay the debt.

Improve Your Financial Situation by Increasing Your Income and Lowering Your Expenses

Part of good money management is getting out of debt and paying down your debt as quickly as possible. Going into default on student loan debt can sabotage your financial goals and damage your personal finances. Before you let your loan go into default, try to figure out ways to get extra income so you can make your payments. Get a second job or start a side hustle to bring in more money. Sell things you don't need. You could also rent out a room in your house or rent out your vehicle. 

You can also save money by lowering certain expenses. If you live by yourself, getting a roommate can help decrease your living expenses. If you live somewhere with good public transportation, consider selling your car and using public transportation instead. If it’s an option, you could live with parents or relatives until you make enough money to afford to live on your own and pay back your student loans along with other expenses. With rents historically high, this could be a smart option for some student loan borrowers. 

Apply for an Income-Driven Repayment Plan

Unless you opt for a different plan, if you’re a federal student loan borrower, you’ll be automatically assigned to the Standard Repayment Plan (SRP). Under the SRP, borrowers repay their student loans within 10 years. While the SRP is the fastest and least expensive way to repay student loan debt, it also has the highest monthly payment. 

The federal government also offers four income-driven repayment plans, which give borrowers a more affordable payment schedule than the SRP. Most federal student loans are eligible for these income-driven plans:

Depending on which income-driven repayment plan you choose, your monthly payment will be 10%-20% of your discretionary income, and your repayment period will be 20-25 years.

For PAYE, REPAYE, and the IBR plans, discretionary income is defined as the difference between your adjusted gross income and 150% of the poverty guideline for your family size and state of residence. For the ICR Plan only, discretionary income is defined as the difference between your adjusted gross income and 100% of the poverty guideline for your family size and state of residence. 

If you enroll in any of these four plans, your monthly payment will be less (sometimes significantly less) than what you would pay under the SRP. For some borrowers, the payment could even be $0 per month. Another benefit is that once you’ve made all required payments for the repayment period (20-25 years), the federal government will forgive or cancel any remaining debt. A small drawback to this is that the IRS considers canceled debt as taxable income, so it may affect what you pay in taxes.

The four income-driven repayment plans only apply to federal student loans. Private student loans don’t offer income-driven plans. If you refinance federal student loans, you essentially convert your federal loans into a private loan. This means the refinanced debt is no longer eligible for income-driven repayment plans. 

Consider a Direct Consolidation Loan

Federal student loan borrowers often have multiple loan servicers, all requiring payments at different times. A Direct Consolidation Loan (DCL) allows you to combine these student loans into one new loan. The new, fixed interest rate on the single consolidated loan is a weighted average of all your loans. Depending on the loan amount, you have up to 30 years to repay the DCL loan. This often lowers your monthly payment.

DCLs are only for federal loans. Private student loans can’t be consolidated into a DCL. To consolidate a private loan, contact your loan servicer. 

Look Into Student Loan Deferment or Forbearance

If you’re having trouble paying your federal student loan, you can also apply for deferment or forbearance. These programs allow you to temporarily stop making payments on your loan. Private lenders usually don’t offer deferment or forbearance. With both deferment and forbearance, interest continues to accrue on your loan. But if your loans are deferred, the federal government pays the interest on the loan during the deferment period. If your loans are in forbearance, you’ll be responsible for paying the accrued interest. You can pay it as it accrues or at the end of the deferment period.   

Student Loan Deferment

When your loans are in deferment, you don’t have to make payments on your federal student loan's principal. The government pays the interest so you’re not responsible for it.

To apply for deferment, contact the loan holder and submit the required forms. Deferments usually aren’t granted for loans already in default, but loan holders will sometimes grant retroactive deferments. 

To qualify for deferment, you meet at least one of the following requirements:

  • You’re attending school at least half-time.

  • You’re enrolled in an approved graduate fellowship program.

  • You’re enrolled in an approved rehabilitation program for the disabled.

  • You’re unemployed and seeking employment.

  • You’re suffering economic hardship.

  • You’re serving active duty in the military.

You may also get a deferment if you have a Perkins Loan. These are federal subsidized loans given to students with exceptional financial need. The federal government no longer offers Perkins Loans, but many borrowers still have these loans. You may qualify for a Perkins Loan deferment if you’re attending school, facing economic hardship or unemploymen, working as a full-time law enforcement officer or corrections officer, serving in the Peace Corps, or for other reasons.

Some private loans offer deferments. Contact your lender or loan servicer to find out about availability. 

Student Loan Forbearance

Forbearance allows you to stop or reduce your payments for a set period. Forbearance is easier to get than a deferment. You can get a loan forbearance for up to one year at a time, and you’re eligible for forbearance even if your loan is already in default. Forbearance for federal loans can either be general or mandatory.

Loan servicers may grant general forbearances for the following reasons:

  • You have medical expenses due to health problems or unforeseen personal problems. 

  • Your employment has changed.

  • You can’t pay your debt within the repayment term (usually 10 years).

  • Your monthly loan payments total more than 20% of your monthly income.

  • Other reasons your loan servicer allows.

Loan servicers must grant mandatory forbearance if you meet any of the following:

  • You’re an intern or resident in a dental or medical program and you meet other specific requirements.

  • Your monthly payment for all your student loans comes to more than 20% of your gross monthly income for up to three years.

  • You’ve served in an AmeriCorps program and received a national service award.

  • You’re teaching in a position that qualifies you for teacher loan forgiveness.

  • Your loans fall under the Department of Defense Student Loan Repayment Program and you qualify for partial loan repayment.

  • You’re in the National Guard and have been activated by a governor, but your loans aren’t eligible for a military deferment.

Consider Student Loan Forgiveness

Under the Public Service Loan Forgiveness Program, federal student loan borrowers employed in public service at a qualifying nonprofit or government agency may have their loans forgiven after making 10 years of qualifying monthly payments. Also, borrowers who use an income-driven plan qualify for student loan forgiveness on the remaining loan balance after making qualifying monthly payments for 20 to 25 years.

If Your Student Loan Debt Goes Into Default, There’s Still Hope

If your loan is already in default, you can get it out of default by going through student loan rehabilitation. Rehabilitation requires you to go through a few steps. 

First, find out who owns your loan. Contact them and tell them you want to apply for loan rehabilitation. You’ll need to give them information about your household size and adjusted gross income. They’ll use this information to figure out your discretionary income and set up a new payment plan. You must agree to the plan in writing. You then start making your new monthly payments. You must make nine out of 10 monthly payments for your loan to be rehabilitated.

When you successfully complete the rehabilitation process, your loan’s default status is dropped. This means you can once again qualify for deferments, forbearance, and loan forgiveness. This can also help you repair bad credit, and it allows you to apply for financial aid again to go back to school. You can only go through loan rehabilitation one time. 

Let's Summarize…

If you can’t make your student loan payments and you default on your student loans, there can be serious and far-reaching consequences. But remember, if you can’t afford your student loan payments, you have options. Use these options to help keep your loans from going into default. 

If you know you can’t make your loan payments, immediately contact your lender or loan servicer to discuss repayment options. They’ll usually work with you to help you avoid going into default. Other ways to avoid default include: decreasing your expenses, increasing your income, applying for an income-driven repayment plan, consolidating your loans for a lower monthly payment, or applying for deferment, forbearance, or loan forgiveness programs. 

Even if your loan goes into default, you can apply for loan rehabilitation, which will remove your loan from default status.

Written By:

The Upsolve Team

Upsolve is fortunate to have a remarkable team of bankruptcy attorneys, as well as finance and consumer rights professionals, as contributing writers to help us keep our content up to date, informative, and helpful to everyone.

Attorney Andrea Wimmer


Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team as Managing Editor. While in private practice, Andrea handled... read more about Attorney Andrea Wimmer

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