What Should I Do if I'm Behind on Repaying My Student Loans?

Facing delinquency

If you’re already behind on payments for a loan not covered by the suspension or you expect to fall into delinquency when it ends, don’t hide your head in the sand. Call your loan servicer to explore your options. “Be prepared to discuss your financial situation — what’s changed, what’s short term and what may be long term,” says Scott Buchanan, executive director of the Student Loan Servicing Alliance, a nonprofit trade association focused exclusively on student-loan-servicing issues. The loan servicer will want specifics, including your income and your discretionary expenses.

If you’re confident that your situation is temporary, you could seek a short-term solution. With a deferment, the loan servicer will suspend your payments. With a forbearance, it will reduce or suspend your payments. They’re offered in increments of three months for up to a year. Either way, interest will continue to accrue, so your loan balance and the total cost of your loan will increase, and if you’re pursuing loan forgiveness, your progress will stop.

If you took a Parent PLUS loan to help pay for your child’s education, you’re legally required to pay the money back. But if your child is better off than you, you could take the “skin-in-the-game” approach and ask him or her to make a few payments, says Melissa Cox, a certified financial planner in Dallas.

Still, for many borrowers those options just kick the can down the road, observes Michael Lux, a lawyer who blogs at StudentLoanSherpa.com. If your payments will be as unaffordable in the future as they are now, or you’re pursuing loan forgiveness, explore switching from a standard repayment plan with a term of 10 years to an income-driven repayment plan, which will reduce the amount of your monthly payments based on your income and family size and extend the loan term to 20 or 25 years. After that the balance is forgiven, although you may owe tax on the amount forgiven. For eligible workers in some public service careers, the Public Service Loan Forgiveness program results in the balance being forgiven after 10 years of payments, with no tax penalty.

If you have a federal loan, like an FFEL or Perkins, owned by a third party, you could consolidate payments into a single, new federal Direct Consolidation Loan so they would qualify for coronavirus deferment and zero interest. Consolidating may not be a good idea for everyone, though, as it resets the clock for loan forgiveness and may also result in deferred interest being added to the balance. Check with your servicer first. To find and compare your options, try this free student loan tool: Loan Simulator.

Whatever path you choose, call your loan servicer well before the May expiration, Buchanan advises, to avoid the last-minute rush.

A final note

Watch out for scammers who may call with offers of secret or special relief. They often use official-sounding company names or claim to be working for a consumer advocacy group or with the federal Education Department. According to the CFPB, red flags include pressure to pay high up-front fees, promises of immediate loan forgiveness or debt cancellation, demands that you sign a third-party authorization or power of attorney, or a request for your unique FSA ID.