Not too long ago, outstanding student loan debt surpassed $1 trillion. On top of that, college tuition costs continue to rise. With costs on the rise, more students need to borrow in order to afford college, and that means that many graduate with a heavy debt burden. Combine that with a difficult economy, and a scarcity of good jobs, and many recent graduates have a hard time making their student loan payments.
If you are burdened by your student loan payments, the good news is that you have options:
With deferment, you put off making your payments (principal and interest) for a set period of time. If you have certain federal student loans, such as subsidized loan or a Perkins loan, the government will pay your interest during the deferment period. With other types of loans, the interest still accrues, even though you don’t have to pay it during the deferment period.
When you ask for forbearance, you can stop making payments, or you qualify for reduced payments, for a set period of time. Interest on all your loans accrues, and it might be added to your loan balance at the end of the forbearance period.
Forbearance is up to your loan service provider, although the lender has to provide forbearance in certain circumstances, when you meet certain requirements.
Income-Based Repayment (IBR)
You might also qualify for a plan from the government to spread out your payments over the course of 25 years, rather than the standard 10-year repayment term. This can be helpful, since it reduces what you pay each month, making your debt more manageable. If you qualify for IBR, your payments cannot exceed 15 percent of your discretionary income each month. This arrangement can result in paying more interest over the life of the loan, but it can help with your cash flow right now.
In some cases, you can qualify to have your student loans paid on your behalf. Certain service organizations, like AmeriCorps, will help you pay off your loans. The military also has programs designed to help graduates pay off their loans. If you meet certain teaching requirements, you can have the balance of your student loans discharged after 10 years. There are a number of programs that will help you with education costs if you are willing to provide civil service.
Whatever you do, though, don’t just ignore your student loan payments. Non-payment of student loans can ruin your eligibility for certain federal benefits and jobs. Talk to your servicer and figure out your options. You might be surprised at the choices available to you.