Asking for directions, everybody makes a wrong turn once in a while. Rather than wandering around aimlessly in search of the right path, you’re usually better off stopping to ask for directions right? The same goes for financial detours. If you find yourself straying from the road to repayment of your student loans, consider getting some informed guidance to help get you back on track.
- Make contact: first and foremost, if you’ve fallen behind on your loan payments, contact your lender. Borrowers tend to avoid speaking with their lenders because they’re uncomfortable discussing their situation. But you’d be surprised how often a simple, straightforward phone call can reveal ways to resolve any issues with your account before they get worse. Discuss the situation. Also, get a handle on your overall budget. Understand where your money is coming from, where it needs to go, and what it will take to meet your various financial obligations. Leverage your options. When it comes to your student loans, remember that federal loans have many more repayment options than private loans do. So, you may be able to reduce the monthly pressure on those debts.
- Deferment: if you’re currently in school you might be eligible for in-school deferment, which requires proof of your enrollment. If you’re unemployed or have had your wages reduced there are deferment options available for those situations too. You’ll just need to provide documentation to verify your unemployment or income status. If your goal is simply to lower your monthly student loan payment, you may have some options.
- Graduated or income-based repayment: Some federal loans can be placed on a graduated repayment plan, which means you pay only the interest on the loan for a given period of time. You may also be able to reset your monthly payment in direct proportion to your income. This requires submission of your most current tax returns and information about your family size.
- Consolidation: loan consolidation lets you combine multiple federal loans into one account with a single monthly payment. It also offers an extended repayment term, which can help you lower your monthly payment but usually adds up to a bigger total expense.
- Forbearance: federal and some private loans can be placed in forbearance while a borrower is experiencing financial hardship. This means your payments are reduced or suspended for a given period of time. The length of forbearance differs from lender to lender but is usually between three months and a year. You may have the option to make interest-only payments during a forbearance period.
- Other resources: in addition to talking to your lender, you may want to contact government agencies or even your employer to find out about programs that may help pay down your student debt. These are just some of the options you may have. Depending on your particular situation, you may have others worth considering. Bottom line, you won’t know unless you ask, and stalling or ignoring payment notices will only make matters worse. The sooner you get reliable directions, the sooner you’ll be back on track.