If you graduated in May 2010, it's probably time for you to start making student loan payments. Unless you want your credit to be in the toilet, you MUST make your payments. I understand if you have high payments. Some of my friends have monthly payments as high as $500! That's a lot of money for someone with a lot of bills or who doesn't have a steady job yet. Fortunately, you have options if you can't afford to pay your student loan payments.
If just want to reduce your payments, there are a few plans you can choose from
Extended
Under this plan, you have 25 years to pay off your loans. You will have a lower payment, but you will pay more in interest because you have a longer repayment period. There are some restrictions with this plan. If Direct Loan is your creditor, you must have more than $30,000 in Direct Loans. If FFEL (Federal Family Education Loan) is your creditor, you must have more than $30,000 in FFEL Program loans.
Graduated
Graduated
With this plan, your payments start out low and increase every two years. This plan also gives you 10 years pay off your loans. This plan is good if you expect your income to steadily increase over time.
Income Based Repayment Plan (IBR)
Under this plan, your payment is based on your income and family size. You are eligible for this plan if your monthly payment is lower under IBR than under the standard plan. This plan also comes with a few incentives. If you repay under IBR for 25 years and meet other requirements, your remaining debt can be cancelled. If you work in public service and repay under IBR, your remaining debt can be cancelled after 10 years in public service. While this plan does have incentives, it also has disadvantages. Because you are making a lower payment, you may pay more in interest. You also have to send your lender documentation about your income and family size every year. You can get an estimate of your payment under this plan by using IBR caluclator.
If you absolutely cannot afford to make any payments at all, you can either apply for a deferment or forbearance.
Deferment
A deferment is a temporary suspension of repayment on your principal loan balance for specific period of time. You do not have to pay interest on subsidized loans during deferment, but you must pay it on unsubsidized loans. If you do not pay the interest on your unsubsidized loans, it will be added to your balance and you will pay more money. You qualify for a deferment under the following conditions:
- Enrolled in school at least part time
- Studying in an approved graduated fellowship program or in an approved rehabilitation training program for the disabled
- Unemployed(Deferment up to three years)
- Economic hardship{Deferment up to three years (including Peace Corps)}
- A member of US Armed forces reserve or the National Guard. You must be called or ordered to active duty while in school at least part time or within six months of having been enrolled at least half-time.
If you do not qualify for deferment, you can apply for a forbearance. A forbearance allows you to postpone or reduce your monthly payments for a specific time period due to financial hardship or illness. You are responsible for paying the interest on both subsidized and unsubsidized loans. If you do not pay the interest, it will be added to your principal balance and you will pay more money.
Paying off your student loans may seem overwhelming, but your education was an investment in yourself. People pay $50,000 for a luxury car that depreciates as soon as they drive it off the lot and pay it off within 5 to 10 years. Don't stress over your debt. Make your payments on time or take advantage of your options if you cannot afford to make payments. Whatever you do, DON'T DEFAULT ON YOUR STUDENT LOANS.
All information presented only relates to Federal student loans and is provided by the Department of Education. For more information, please visit studentaided.gov. If you have private student loans, contact your lender(s) for repayment options.
