you canít afford to pay your federal student loans,
what should you do?
your loan servicer and explain your predicament. The
name of your servicer is on your bill, giving you
information about what you owe and how payments are
collected. If the servicer behaves correctly, the person
you get on the phone should explain the options
available if you canít pay and tell you if you
often that process doesnít go as it should. Borrowers
have trouble reaching their servicers, and too often the
people on the other end of the phone arenít very
helpful, according to government studies. Even worse,
some of the servicers have pushed borrowers to pay when
they are in fact entitled to temporary relief.
result has been that too many people have ended up
defaulting on their loans, and the government has missed
the chance to eventually get borrowers back on track.
Since the Direct Loan Program is federal, taxpayers
ultimately take the hit if borrowers donít pay back
the end of 2015, 19.7 percent of student loan borrowers
were considered delinquent by the Department of
Education. In other words, either because the borrowers
couldnít pay, didnít want to pay, or were mixed up
about what to do, they were more than 30 days behind on
their student loan payments.
the delinquency rate has been improving with a better
job market, and the department has responded to
criticism about the student loan program, a May U.S.
Government Accountability Office study says the
servicers ó under contract with the government ó
still are not being watched well, and that complaints
arenít being tracked. Borrowers are having trouble
getting information they need over the phone.
report concludes that if borrowers arenít able to
obtain the information they need to manage their loans,
then they will be "more at risk for delinquency or
past government reports, research has identified
failures such as servicers requiring payments even when
borrowers should have been allowed a grace period of six
months after graduation. During that time, graduates
arenít required to pay their loans because they still
are securing jobs and getting their feet on the ground.
reports also have noted that the government contracts
with servicers have rewarded them for putting pressure
on borrowers to pay rather than explaining programs that
cut payments when people are out of jobs or in
low-paying jobs. In 2015, the GAO calculated that half
of people making student loan payments would have
qualified to pay less, but only 13 percent knew to ask
or press the matter.
Education Department, amid criticism, has beefed up
efforts to steer more borrowers into payments they can
afford, and last year reported a 48 percent increase in
borrowers making use of a program that provides
affordable payments. Itís called "income-based
repayment." Nearly 4.6 million people recently had
monthly payments reduced temporarily because their jobs
havenít been paying enough to cover the normal
with the GAO still noting concerns, borrowers should ask
the right questions for relief.
understand if you will qualify to get your payments
reduced based on your income, see the governmentís
income-based repayment information at studentaid.ed.gov.
Try this calculator to see how a reduction based on your
income will help you each month.
that the help only is provided for federal loans, not
private loans from banks or other lenders. And even if
you qualify for help with federal loans such as Stafford
Loans, you donít avoid paying back the government
forever. When your pay goes up, so will your monthly
payments. If you still owe money after 20 years, you may
note that if you work in public service jobs, you can
get your loans forgiven. If you work in state, local or
federal government, consider breaks given to everyone
from nurses, elderly aids, librarians and teachers to
police and the military.
beware of refinancing federal loans. If you lose a job,
or end up with financial troubles, you wonít get help
from private lenders.