You could suffer far-reaching and devastating consequences if you default on your student loans. Your balance will become due immediately. You could face thousands of dollars in fees, damaged credit scores and wage garnishments. These are only a few of the many consequences that may result from a student loan default. Job loss is a common reason why people default on their student loans. After a job loss, many people find they are unable to make payments. Fortunately, there could be several options that may help you avoid a student loan default until you can find another job.
Option 1: Enroll in an Income-Driven Repayment Plan
If you have federal student loans, then you may be eligible for an income-driven repayment plan (IDR plan). These are plans that limit your monthly payments to a percentage of your household income.
If you do not have income, then you could owe $0 a month until you recertify your income with a new job. Income-driven plans are not available for borrowers with student loans in default.
Option 2: Apply for an Economic Hardship Deferment
You could apply for an economic hardship deferment if you have federal student loans in good standing and are unable to make payments. This option will temporarily pause your monthly payments for up to six months. If you have subsidized federal loans, then no interest will accrue while your loans are in deferment. However, interest will accumulate for unsubsidized loans.
Option 3: Apply for Forbearance
You may qualify for forbearance if you have federal or private student loans. Like the deferment, this option can temporarily halt your monthly payments. Interest will accumulate on your loans for as long as they stay in forbearance. Your private student loan lender may or may not offer this option.
Option 4: Change Your Payment Due Date
In some cases, your lender might allow you to change your payment due date. This can be a good option if you believe you can find another job in a short period of time.
Why You Should Avoid a Student Loan Default
Once you have defaulted, you have fewer options for managing your repayments. Deferments and income-driven plans may no longer be options after defaulting. You may be able to rehabilitate or consolidate your federal student loans, but these options might also come with consequences (such as collection fees or higher interest rates). Still, you should try to bring your loans back into good standing so helpful repayment options are available again.
Do you have questions about making your student loan payments more affordable? Contact our Kansas City student loan lawyers for a consultation that can explain which options are available for your situation.