What to Do if You’re Struggling to Make Your Student Loan Payments

Student loan debt is a heavy burden for many people. With rising tuition costs, it’s no wonder that more borrowers are finding it harder to keep up with their monthly payments. Whether it’s due to a job loss, an unexpected financial setback, or just the sheer weight of a large loan balance, it can feel overwhelming. But you don’t have to go through this alone. There are ways to manage your debt and avoid default. In this post, we’ll explore a few options that can help if you’re struggling to keep up with student loan payments.

1. Take a Close Look at Your Finances

Before taking any action, it’s important to get a clear picture of your financial situation. Look at your income, expenses, and any other debts you may have. Are you having a temporary cash flow issue, or is this more of a long-term concern? If it’s just a short-term problem, you may be able to catch up on your payments once your finances stabilize. But if it’s something more persistent, you’ll need a more strategic plan for managing your student loan debt.

Create a Budget:

The first step is to create a budget. This will help you track your spending, identify areas where you can cut back, and find more room in your finances to put toward your student loan payments. By understanding exactly where your money is going, you’ll be able to prioritize loan payments and see if there’s any flexibility in your spending that can help you keep up with your debt.

Cut Back on Non-Essential Spending:

Once you’ve got your budget in place, take a close look at it. Are there subscriptions or services you don’t really use? Could you cut back on things like eating out or entertainment? Even small adjustments to your lifestyle can make a big difference in freeing up extra cash to put toward your loans.

2. Consider Income-Driven Repayment Plans

If your financial situation makes it hard to afford your current monthly payments, an income-driven repayment (IDR) plan could be a good option. IDR plans adjust your monthly payments based on your income and family size, so if you qualify, your payments could be lowered significantly — in some cases, to as little as $0 a month.

How IDR Works:

These plans cap your monthly payments at a certain percentage of your discretionary income. There are four main types of IDR plans:

Revised Pay As You Earn (REPAYE): Payments are 10% of your discretionary income.
Pay As You Earn (PAYE): Payments are 10% of your discretionary income, but never higher than what you’d pay on a standard 10-year plan.
Income-Based Repayment (IBR): Payments are 15% of your discretionary income (or 10% if you borrowed after July 1, 2014).
Income-Contingent Repayment (ICR): Payments are the lesser of 20% of your discretionary income or what you’d pay on a fixed 12-year plan.

By signing up for an IDR plan, you can lower your monthly payments and still stay on track with your loan. Just be aware that you’ll need to provide proof of income every year to keep your eligibility.

The Upside of Lower Payments:

IDR plans can give you immediate relief by reducing your monthly payment, which is especially helpful if your income is low. But keep in mind, interest might still accumulate, and over time, you could end up paying more in interest. Some plans also offer loan forgiveness after 20 or 25 years of qualifying payments, which can be a real benefit if you have a large loan balance.

3. Think About Refinancing Your Student Loans

If you’re dealing with high interest rates, refinancing your student loans could help you lower your monthly payments and save money over time. Refinancing involves taking out a new loan to pay off your existing loans, often at a lower rate. However, refinancing is best for people who have a stable income, a good credit score, and who don’t need federal loan protections like income-driven repayment or loan forgiveness.

If you’re currently paying high interest rates on your loans, you might want to explore your options. Comparing student loan refinance rates can show you whether refinancing could help you get better terms and reduce the amount you pay over the life of your loan.

How Refinancing Can Help:

Lower Interest Rates: If you qualify for a lower interest rate, you could save hundreds or even thousands of dollars over the life of your loan.
Flexible Terms: Refinancing gives you the option to choose a loan term that works for you, whether it’s a shorter term with higher payments or a longer term with smaller payments.
Consolidate Multiple Loans: If you have several loans, refinancing can help you consolidate them into one loan with one monthly payment, making it easier to manage.

Just remember, refinancing federal loans means you’ll lose access to federal benefits like income-driven repayment and loan forgiveness. Make sure you weigh the pros and cons before going down this route.

4. Look Into Forbearance or Deferment

If you’re facing a temporary financial struggle and can’t afford your payments, forbearance or deferment might help. These options allow you to temporarily stop or reduce your payments for a while.

Forbearance:

Forbearance typically lasts up to 12 months, and in some cases, it can be extended. But be aware, interest will keep accruing during this time, so it’s not always the best solution in the long run.

Deferment:

Deferment is similar to forbearance, but it may be available in certain situations like unemployment or financial hardship. The good thing about deferment is that, depending on your loan, the government may pay the interest during the deferment period, helping you avoid accumulating more debt.

Both options can offer temporary relief if you need it. However, they shouldn’t be relied on for long periods since interest will still add to your balance, and they might end up costing you more in the long run.

5. Get Professional Help

If you’re still struggling to make your payments and aren’t sure which option is best for you, it could be helpful to speak with a financial advisor or student loan expert. They can guide you through your options, help you understand your financial situation, and come up with a plan that works for you.

Some financial counselors can even help you negotiate better terms with your loan servicer or lender. And, many nonprofit organizations offer free counseling services, so be sure to look into your options before paying for any assistance.

Conclusion

Struggling with student loan payments is tough, but it’s not something you have to face alone. There are several options out there, including income-driven repayment plans, refinancing, forbearance, and deferment. Take the time to review your financial situation, explore all the available options, and take action to get back on track.

The key is to stay proactive. You have options — and by taking the right steps, you can manage your student loan debt and make it a little less overwhelming.