A reader is panicked because her break from paying student loans is coming to an end.
Question: When I got laid off last year, I got a deferment on my student loan. Now it’s ending, and I don’t know exactly what happens next. I got a new job, but it’s part-time and not full-time, and I’m not sure I can make a payment and still eat and make rent. Is there anything I can do?
— Melissa in North Carolina
Howard Dvorkin CPA answers…
“Deferment” is what the federal government calls postponing your student loan payments. In most cases, that means you don’t have to pay principal or interest, although for PLUS or unsubsidized loans, you do have to pay the interest.
Of course, deferment isn’t forgiveness. It seems like you earned a deferment for being unemployed, Melissa, but other reasons include suffering a financial hardship or being in school at least half time. Whatever the reason, eventually the bills come due. What happens if, like you, you still don’t have the money to make the payments?
Make a phone call
If you’re struggling to make the payments, call the same people who gave you the deferment in the first place — your loan servicer. While your deferment has ended, your servicer might work with you on a “repayment plan” that might ease your burden while still paying down your loan.
These range from what’s called standard to pay-as-you-go. The rules can get rather detailed, so click those links for more information. If you find that overwhelming, you can call one of our certified counselors for a free consultation at 1-888-472-0365.
In some cases, the federal government will out right forgive your loan — you pay nothing more. However, to qualify for that, you need to be employed in specific occupations, such as a nurse, teacher, police offer, or firefighter. Again, there’s a lot of fine print, but Debt.com explains it all in plain English in Understanding Student Loan Forgiveness.
Fix everything else
You don’t mention if this is your only pressing debt, Melissa, but in my experience as a CPA and financial counselor, what crushes most Americans isn’t just one debt, but a one-two punch — in your case, it might be formidable student loan payments that force you to ring up your credit cards, so now you owe thousands in interest you simply can’t afford.
If that’s the case, I suggest a holistic approach. Call our credit counselors for a free debt analysis, so you can tackle everything at once. I’ve learned this in 20 years: The worse it looks, the more solutions are available to right the ship.
Have a debt question?
Email your question to firstname.lastname@example.org and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of Debt.com, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.