Thinking about defaulting on student loan debt? Try these financially savvy options instead.

4 minute read

Remember how excited you were when you received student loans to pay for college? Now that’s all in the past, and your happiness may be fading now that you’re in repayment, especially if you’re having trouble making monthly payments on student loans. You may even be creeping toward default.

No matter how much you’re struggling financially, however, defaulting on a student loan isn’t an option to consider. Student loan default can damage your credit, increase the debt substantially and haunt you even after you start drawing social security retirement benefits.

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1. Switch to an Income-Driven Repayment Plan

Switch to an Income Driven Repayment Plan

If you don’t earn enough at your job to make your monthly federal student loan payments, it may be time to contact your loan holder about changing to an income-driven repayment plan.

“Most federal student loans are eligible for at least one income-driven repayment plan,” according to the U.S. Department of Education. If your income is low enough, you may even be able to get your payment as low as $0 per month while you sort out your finances.

2. Switch the payment due date

Maybe your late-payment problem stems from a due date that falls on an inconvenient week between paydays. For example, if your rent is due on the first of the month, your car payment on the 7th, your student loan on the 10th, that’s a huge chunk of expenses for one paycheck to cover.

If that’s the case, contact your loan servicer to see about changing your payment due date to one that works better. Create a monthly budget if you don’t have one, so one day you can get to a point where everything is covered regardless of the payment due date.

3. Apply for a forbearance

Apply for a forbearance

A forbearance allows you to stop making payments temporarily for a specified length of time. During the forbearance period, interest continues to accrue, which can raise the amount of the loan. You can apply for forbearance with your loan servicer.

If possible, keep paying at least the interest amount every month during a forbearance, since that will stop monthly interest from being capitalized and added to your loan principal at the end of the forbearance period.

Find out: What Happens if You Can’t Pay Your Student Loans.

4. Check into deferment

You may be able to receive a deferment from your loan servicer, which also allows the borrower to stop making payments temporarily during a specified period. Depending on the type of federal loan, you may not be responsible for paying any interest that accrues during a deferment.

Contact your loan servicer to find out if you’re eligible for a deferment, especially if you’re experiencing financial hardship or medical problems, have a disability or are unemployed and unable to find work.

5. Consolidate multiple loans

Consolidate multiple loans

If you’re having trouble making federal student loan payments on more than one loan, contact your loan servicer about consolidating multiple loans into one Direct Consolidation loan, which has a fixed interest rate for the life of the loan.

To qualify for consolidation, the loans must be in repayment or the grace period. Payments begin 60 days after the loan is disbursed (paid out).

6. Explore Loan Forgiveness Programs

While the government isn’t exactly famous for its forgiving nature when it comes to money loaned or owed, the U.S. Department of Education offers a few student loan forgiveness options that could eventually get rid of your student loan debt for good.

You may be able to receive loan forgiveness on the remaining balance of your Direct Loans under the Public Service Loan Forgiveness (PSLF) Program. Qualifying teachers could also be eligible to receive forgiveness up to $17,500 through the Teacher Loan Forgiveness Program. Disabled military veterans may also be eligible for student loan forgiveness.

7. Head back to school

Will pursuing an advanced degree or taking college courses help you secure a higher-paying job so you can pay off existing student loans faster? Going back to school may be the answer. When you enroll in an eligible college or career school at least half-time, in most cases, your federal student loan will be placed in deferment automatically.

Obtaining more student loans isn’t a viable option if you can’t afford the loans you already have, of course. Does your employer have a tuition reimbursement program? Are you eligible for scholarships? Can your parents pay your tuition or loan the money? Find out.

Looking for student loan debt relief? can connect you to a certified debt professional.

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About the Author

Deb Hipp

Deb Hipp

Deb Hipp is a full-time freelance writer based in Kansas City, Mo. Deb went from being unable to get approved for a credit card or loan 20 years ago to having excellent credit today and becoming a homeowner. Deb learned her lessons about money the hard way. Now she wants to share them to help you pay down debt, fix your credit and quit being broke all the time. Deb's personal finance and credit articles have been published at Credit Karma and The Huffington Post.

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