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 government calls postponing the payments on your federal student loans. 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, student loan unemployment deferment isn’t student loan forgiveness. It seems like you were applying for deferment for being unemployed, Melissa, but other reasons include suffering 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 debt burden while still paying down your loan.
Repayment programs 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 outright 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.