Life happens and can sometimes result in a financial crisis. When you have a limited amount of income that can mean making tough choices on what to pay for first. Hopefully you can avoid something like this from happening to you in the future, but in the meantime here’s what to do if you’ve already missed a student loan payment or two.
1. Don’t ignore the problem. Open all your mail and stay informed. Then do what you can to minimize the negative effects and create a crisis budget, prioritizing all your expenses and focusing on necessities.
2. Contact your servicer right away. Call or apply online for either a temporary forbearance or economic hardship deferment, depending on your situation. Try to avoid falling further behind and make sure the terms are realistic for you before agreeing to anything.
3. Consolidate eligible loans. If you haven’t done so, this can usually help reduce your monthly payments and unless you’re in default, it will bring your payments current if you’ve fallen behind. To help decide if it’s right for you, check out this post about consolidating student loans.
4. Check into payment options. For federal loans, there are payments based on income (Income Based Repayment / Income Contingent Repayment) and there are even graduated payments where the payments start out smaller and are increased over time. Just like any loan, be aware of the potential consequences like negative amortization (balances increasing because payments don’t cover interest).
5. Beware of scams. Last but not least, never pay anyone to help you navigate your student loans. If you need more assistance than the tips above, call LSS at 888.577.2227 to schedule a free student loan appointment. Our counselors are here to help you explore and understand your options and potential solutions.
Also, there are other reputable and free resources available, including Student Loan Borrower Assistance, provided by the National Consumer Law Center and the Department of Education. If you’re already in default, visit MyEdDebt.ed.gov.
If your student loans are in good standing and you just have some credit cards you’d like to pay off faster, we can help. Call us or get started online from the comfort of your own home. Remember, our services are free and confidential. We’re here to help you conquer your debt!
Author Elaina Johannessen is a Program Director with LSS Financial Counseling.