If you’re struggling to make your student loan payments, there are many options better than strategic default. Whether your loans are public or private, these alternatives get better results than ignoring your payments.
Deferment or forbearance
Both deferment and forbearance allow you to put a pause on your student loan payments, so long as you’re not in default. You’ll keep your good credit and avoid delinquency. Forbearance still accrues interest, as does deferment for unsubsidized federal loans.
However, with subsidized federal loans, no interest will accrue while payments are paused. While many private student loan lenders offer deferment while you’re in school or active military duty, not all of them will offer forbearance.
You may want to talk to a student loan lawyer about which of these options apply to you. Even if interest continues to accrue on your loan, having a break to regroup and rebuild your finances can be helpful.
Federal loans can offer repayment plans based on how much you make. By supplying your income information, you can get a payment plan tailored to your financial situation. If you can’t make your current payments, this can be an excellent way to find relief without defaulting.
Unfortunately, private student loans don’t usually offer income-based repayment options or many other flexible payment plans.
If you’re finding it difficult managing several different student loans all at once, a consolidation or refinance loan can combine your loans, making them easier to manage. This is an option available to both federal and private borrowers.
For defaulted federal student loans, a Direct Consolidation Loan can get your student loan back in good standing within 2-3 months.
To qualify, you’ll need to make 3 consecutive, on-time monthly payments or agree to repay the new consolidation loan under an income-driven repayment plan.
This route is reserved for federal student loans that are in default. Student loan rehabilitation can help repair some of the damage to your credit by removing the default from your credit report.
Your defaulted student loan will be in good standing after you’ve made 9 payments during a period of 10 consecutive months. Just remember, this option is only available once, so make it count!