What do I do if I can’t pay my student loans?

For most people, your first student loan payment will come due once your grace period ends. This is typically six months after you graduate or if your enrollment status drops below half-time. Even if you’ve already begun making payments, you may be struggling to keep up if you’re on a tight budget. The good news is that you have options. There are ways to reduce or temporarily pause your monthly payments.

What happens when you don’t pay student loans?

Student loan delinquency

Federal student loans become delinquent if you miss a monthly payment. This happens the first day after your payment due date. You can restore your account’s good standing by repaying your past due amount or making other arrangements. But leaving your account unpaid for too long can lead to serious consequences. Your servicer will report the delinquency to the credit bureaus after 90 days of missed payments.

The protocol for private student loans will depend on the servicer, so be sure to understand your repayment obligations and consequences for missing payments. Private student loans may have shorter timelines for reporting delinquent accounts to the credit bureaus.

Additionally, both federal and private student loans may charge fees for missing payments, and you may also lose other benefits like interest rate discounts.

Student loan default

Most federal student loans will default after 270 days of nonpayment, and the timeline will vary for private student loans. Going into default on your student loans may lead to your entire balance—including interest and fees—becoming due immediately.

Since student loan delinquency and default will show up on your credit reports, each will likely hurt your credit score. This can directly impact your ability to access credit in the future, such as applying for additional student loans, opening a credit card, getting approved for a mortgage or auto loan, or receiving other types of financing. You may also be at risk for having your wages garnished as a means to repay the debt.

Steps to take if you can’t pay your student loans

Going into delinquency or default can have serious consequences. It’s in your best interest to take every step possible to avoid missing payments.

1. Contact your student loan servicer

If you even think you’re going to miss an upcoming payment, reach out to your student loan servicer immediately and explain your situation. Early intervention can help prevent you from missing a payment.

2. Look into federal student loan forgiveness

You may qualify for a federal student loan forgiveness program. If so, you won’t be responsible for repaying some or all of your loans. Teachers, government employees, nonprofit employees, and certain medical professionals might be eligible for loan forgiveness, cancellation, or discharge. You may also qualify if you have a disability or are enrolled in an income-driven repayment plan.

3. See if your employer will reimburse you for student loan payments

Take a look at your employee benefits to see if there are any debt assistance perks available. According to the Employee Benefit Research Institute, 25% of employers offer student loan debt assistance—another 24% are planning to in the future as of October 2022.

4. Reduce your expenses

If it feels like you can’t pay student loans right now, try reining in your expenses. This can free up cash that you can redirect toward your monthly loan payments. Track your spending to find out where your money is going each month, then see if there’s anything you can reduce or eliminate. That can include everything from an unused gym membership to streaming services. These costs can add up.

5. Increase your income

See if there are any ways to give your income a little boost. Picking up a side hustle is one way to increase your monthly take-home pay. Some options include:

• Dog walking
• Babysitting
• Selling art or other creative projects online
• Tutoring
• Driving for a ride-share service
• Freelancing within your professional industry
• Waiting tables or bartending
• Working part-time at a retail store

Asking for a raise or one-time bonus at work can also go a long way.

6. Change your repayment plan

There are many different repayment plans for federal student loans. You likely chose the standard repayment plan, or it was applied as the default. This is a 10-year plan that gets you to the finish line faster than some of the other options. But if you’re struggling to make your payments on this schedule, you can change plans at any time. A few of them are income-driven, meaning that the amount you pay each month tops out at a certain percentage of your monthly earnings. After a set amount of time, the balance is forgiven.

Your repayment plan options for a private loan are set for the life of the loan and will vary from one lender to another. Some lenders offer repayment assistance options if you’re struggling to make your monthly payments.

7. Get a Direct Consolidation Loan

If you have multiple federal loans, you can use this program to combine them. It won’t necessarily lower your interest rate, as the rate on the new loan will be a weighted average of the loans you’re combining, but it could lower your monthly payment. This is helpful in managing your monthly payments with your other financial obligations—just keep in mind that it will increase the total cost of your loan since your loan term will reset. If you only have federal loans or the bulk of your loans are, this is an option worth exploring.

8. Explore private student loan refinancing

Another option is a private consolidation loan or refinance loan, which typically allows you to combine federal and private loans into one loan with a single interest rate and payment due date. However, you will lose benefits associated with federal loans, including more flexible repayment options and any progress toward loan forgiveness. With a private consolidation or refinance loan, it’s possible to lower your interest rate and reduce your monthly payment. Keep in mind that if you extend your repayment period, you could end up paying more in interest, even with a lower rate. Do the math to see if it’s the right option for you.

9. Hit pause on your loan payments

Federal student loans have deferment and forbearance options that allow you to temporarily take a break from student loan payments. With private loans, these options may be similar to the federal student loans but vary from lender to lender so check with your servicer to see what is available.

For most loans, interest will continue to accrue during deferment and forbearance. You can pay the interest as it accrues or it will be added to your principal balance when your repayment schedule resumes. This is called capitalization and may increase the amount of your monthly payments and the total cost of your loan.

Struggling to make student loan payments can be stressful, but you have options. With the right solutions, you can get back on the right track and keep your loans in good standing.