Being a little late to all your social plans is a way of life. But if you’re going to be late making (or totally miss) a student loan payment, you’ll need to do more than send a quick ‘on my way!’ text.
So what’s the move?
Call your loan servicer ASAP. They can help you make a plan based on your current financial situation. Because everyone’s happy when your payments are on track.
If you have federal student loans, the plan could be “deferment.” That’s when you hit pause on your payments – typically for up to three years. If you have a subsidized loan, your budget will get a lot of breathing room. Because you don’t have to pay anything. If you have unsubsidized loans, you’ll still eventually be on the hook for any interest that accrues while you’re on a break.
What’s another option?
Forbearance. It’s like deferment, but easier to qualify for. And generally lasts for up to 12 months at a time. The catch: you’ll still have to make interest payments. (Notable exception: administrative forbearance – the gov’s way of saying ‘we got you’ to borrowers during the pandemic.) If you can’t swing the interest-only payments, the interest will capitalize. That’s a four-syllable word for ‘get tacked onto your loan later.’ Meaning you could end up paying back WAY more than you borrowed if you aren’t careful.
Same goes for private lenders right?
Maybe not. Private lenders aren’t obligated to offer deferment and forbearance programs, but some will let you make smaller or interest-only payments for a limited time if you can prove you need it. You never know until you ask.
Related: How to Negotiate to Get More of What You Want
This feels like a temporary solution.
It wasn’t gonna last forever. Choose your own adventure with one of these next steps:
Get back in the saddle. Take a deep breath, look at your loan balance, and work monthly payments back into your budget.
Ask for an extension. If you can’t see yourself back in the payment game yet, ask your loan servicer for more time. Just remember that interest could keep rolling if they say yes.
Rethink your repayment plan. Federal borrowers have eight options that can be switched up at any time. Pro tip: go for one that calculates your payment based on your income if you need more money in your wallet now.
Streamline. Consolidating loans isn’t about lowering your interest rate. But it can combine your monthly payments (and simplify your budgeting life) if you have multiple federal loans. It can also lower your payment amount if you extend your loan term.
Get a debt do-over. Refinancing can help you say ‘bye’ to your current loan and ‘hi’ to a new one with terms you like better. Buuuut you have to use a private lender. If you have federal loans, you’ll be converting them to private. And maybe missing out on certain perks from Uncle Sam.
Any way to make up for lost time?
See if you can make any changes to your strategy to reach debt-zero faster.
If life gets in the way of making your student loan payments, don’t panic. Call your servicer and make a plan to get caught up – and stay on track.
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