If you can’t pay your student loans, the most important thing to know is that you have options and should act quickly. Ignoring your loans can lead to default, which hurts your credit and may cause wage garnishment. But by contacting your loan servicer early, you can explore deferment, forbearance, income-driven repayment, or other solutions to get back on track.
What Happens If You Miss Payments?
When you miss a payment, your loan becomes delinquent. If you don’t make payments for 90 days, your servicer may report it to credit bureaus, which can lower your credit score. After about 270 days (for federal loans), the loan goes into default, meaning the entire balance becomes due immediately.
Default has serious consequences. The government can garnish your wages, take your tax refunds, or even reduce your Social Security checks. You may also lose eligibility for future financial aid and deferment options. That’s why it’s crucial to act before you fall behind.
Immediate Steps to Take If You Can’t Pay
Don’t wait until you miss a payment. Contact your loan servicer as soon as you know you’ll have trouble. They can help you understand what options are available based on your situation.
Here are the first steps you should take:
- Review your loan balance, interest rate, and servicer contact information online.
- Call your servicer and explain your financial hardship honestly.
- Ask about income-driven repayment plans, deferment, or forbearance.
- Set a reminder to re-certify your income annually if you enroll in an income-driven plan.
- Consider loan consolidation if you have multiple federal loans.
Deferment and Forbearance
Deferment and forbearance allow you to temporarily stop making payments or reduce your payment amount. During deferment, interest may not accrue on subsidized federal loans. Forbearance always accrues interest, even on subsidized loans.
You can request a general forbearance for up to 12 months at a time. Deferments include options for unemployment, economic hardship, or military service. These options are not permanent, but they give you breathing room.
Key Differences Between Deferment and Forbearance
| Feature | Deferment | Forbearance |
|---|---|---|
| Interest accrual | No interest on subsidized loans | Interest accrues on all loans |
| How long | Usually up to 3 years | Up to 12 months at a time |
| Eligibility | Specific situations (e.g., unemployment) | Financial hardship |
| Impact on credit | No negative impact | No negative impact |
Income-Driven Repayment Plans
Income-driven repayment (IDR) plans cap your monthly payment at a percentage of your discretionary income. Your payment can be as low as $0 per month if your income is low enough. These plans also offer loan forgiveness after 20 or 25 years of qualifying payments.
There are several IDR plans, including Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Saving on a Valuable Education (SAVE). You can apply online for free through the Federal Student Aid website. You must re-certify your income each year, but your payment adjusts with your earnings.
Loan Forgiveness and Discharge
Certain professions and situations may qualify for loan forgiveness. Public Service Loan Forgiveness (PSLF) forgives the remaining balance after 120 qualifying payments while working full-time for a government or non-profit organization. Teacher Loan Forgiveness offers up to $17,500 for qualifying teachers.
Total and permanent disability discharge is available if you meet specific disability criteria. Closed school discharge may apply if your school closes while you’re enrolled. However, these programs have strict requirements, so research carefully.
What About Private Student Loans?
Private student loans are different from federal loans. They are not eligible for income-driven repayment or federal forgiveness programs. However, you can still contact your private lender to discuss options like temporary forbearance or loan modification.
Some private lenders offer hardship programs, but interest will continue to accrue. If you can’t pay, consider refinancing to get a lower interest rate or a longer repayment term. But refinancing federal loans with a private lender means losing federal protections, so weigh the pros and cons.
How to Avoid Default
The best way to avoid default is to stay in communication with your servicer. Even if you can’t make a full payment, make a partial payment if possible. Every little bit helps reduce interest and keeps your loan in good standing.
You can also request a new repayment plan with a longer term to lower your monthly payment. For example, switching from a standard 10-year plan to an extended plan can cut your payment significantly. Use the federal loan simulator to compare options.
What If You Already Defaulted?
If your federal loan is already in default, you have options to get out of default. One option is loan rehabilitation, where you make 9 on-time payments over 10 months. After rehabilitation, the default is removed from your credit history.
Another option is loan consolidation, which allows you to take out a new loan to pay off the defaulted one. However, you must agree to an income-driven repayment plan. You can also apply for a hardship discharge in limited cases.
Practical Summary
If you can’t pay your student loans, don’t panic. Contact your loan servicer immediately to discuss deferment, forbearance, or income-driven repayment. For federal loans, IDR plans can lower your payment to $0 and lead to forgiveness. For private loans, talk to your lender about hardship options. The key is to act early and never ignore the problem. Taking proactive steps protects your credit and your financial future.
Frequently Asked Questions
What happens if I don’t pay my student loans at all?
If you don’t pay your federal student loans for about 270 days, they go into default, which can lead to wage garnishment, tax refund seizure, and a damaged credit score.
Can I defer my student loans if I can’t pay?
Yes, you can request a deferment for specific situations like unemployment or economic hardship, which temporarily pauses your payments, and interest may not accrue on subsidized loans.
How do I apply for income-driven repayment?
You can apply online through the Federal Student Aid website, and your payment will be based on your income and family size, often as low as $0 per month.
Will forbearance hurt my credit?
No, forbearance does not hurt your credit, but interest will continue to accrue, which increases your total loan balance.
What is the difference between deferment and forbearance?
Deferment may avoid interest on subsidized loans, while forbearance always accrues interest; both temporarily pause or reduce payments.
