Can't Pay Your Student Loans? Here's What You Need to Do

• If you’re struggling to pay your student loans, don’t wait—contact your student loan servicer or lender immediately to explore your options.

• Your solutions differ based on whether you have federal or private loans, with federal loans offering more flexible repayment plans.

• While options like deferment and forbearance can provide quick relief, they’re best for temporary hardships and won’t solve long-term affordability issues.

• From income-driven repayment for federal loans to refinancing for private loans, there are multiple paths to manage your debt—your best solution depends on your unique situation.

• For complex cases, especially with private loans, don’t hesitate to seek advice from a student loan lawyer or financial planner or connect with others facing similar challenges.

Knowing you can’t afford to pay your student loans can be demoralizing. You want to pay, but all the options from your loan servicer or lender seem impossibly expensive. It’s like they don’t understand your personal financial situation, your cost of living, or where you are in your job hunt.

So what do you do? Stop paying? But aren’t there consequences if you do that?

Before you start to spiral, take a deep breath. There are options. We just have to find the right one for you.

The starting point is identifying whether you have federal or private student loans. This distinction matters because your options change drastically depending on whether you’re dealing with the U.S. Department of Education or a private lender like Sallie Mae.

In this guide, we’ll explain what to do when you can’t pay your student loans, covering options for both federal and private loans. We’ll also I thinexplore ways to make your payments more manageable and explain the potential consequences of non-payment.

Let’s dive in and explore your options.

If you’re struggling to pay your student loans, your first step should be to contact your loan servicer immediately. Don’t wait until you’ve missed a payment — being proactive can help you avoid default and access various relief options.

Before you make the call, gather your financial information. Have your income details, a list of your expenses, and your loan information ready. This preparation will help you have a more productive conversation with your servicer.

When you speak with your servicer, ask about income-driven repayment plans, deferment, or forbearance options. These programs can potentially lower your monthly payments or temporarily pause them, giving you some financial breathing room.

In many cases, you may be eligible for an immediate emergency forbearance. This option can pause your payments temporarily, usually for up to 12 months, giving you time to improve your financial situation or explore long-term solutions.

While it might be tempting to ignore your loans when you can’t afford the payments, doing so can lead to serious consequences. Failing to address the issue can result in damaged credit, making it harder to rent an apartment, buy a car, or even get certain jobs.

In extreme cases, you might face wage garnishment or having your tax refunds and Social Security benefits offset to repay your loans.

Related: What Happens If You Default on Private Student Loans?

The quickest way to lower your student loan payments depends on whether you have federal or private loans. Here are your options, along with typical processing times:

Federal Student Loans

• Income-Driven Repayment Plans: IDR Plans adjust your monthly payment based on your income and family size. Options include Biden’s new SAVE Plan and mainstays like Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR). Your payment could be as low as 10-20% of your discretionary income. Apply at StudentAid.gov or contact your loan servicer.

• Extended Repayment Plan: If your federal loan balance is over $30,000, you can extend your repayment term up to 25 years, lowering your monthly payments.

• Graduated Repayment Plan: This plan starts with lower payments that increase every two years.

The processing time to change to an IDR plan is typically 2-3 weeks. Switching to the Extended or Graduated repayment options happens faster: usually 1-2 weeks.

Private Student Loans

• Interest Rate Reduction Programs: Many private lenders offer temporary interest rate reductions for borrowers facing financial hardship. The processing time is often just a few days. Contact your lender directly to inquire.

• Temporary Payment Reduction or Forbearance: Some private lenders offer short-term payment reductions or forbearance for financial hardship. Terms vary by lender. Processing time: Usually within a week.

When contacting your servicer or lender, you might say: ‘Hello, I’m having difficulty making my loan payments due to [reason]. Can you tell me about options to lower my payments or pause them temporarily? I’m particularly interested in income-driven repayment plans and deferment or forbearance options.’

Pro tip: For both federal and private loans, setting up autopay can often earn you a small interest rate reduction (typically 0.25%), slightly lowering your payments. This can usually be set up immediately.

Remember, the best option depends on your specific situation. For federal loans, log into your StudentAid.gov account or contact your loan servicer to discuss these options. For private loans, reach out to your lender directly. Act quickly to avoid missing payments and potential negative consequences.

Related: How to Get Private Student Loans Forgiven

When you’re struggling to make your student loan payments, deferment and forbearance can provide temporary relief. These options allow you to pause or reduce your payments for a limited time. But although these tools are helpful at the moment, they might create more problems down the road.

Deferment and forbearance both pause payments, but they differ in how interest is handled. During deferment, interest doesn’t accrue on subsidized loans, while in forbearance, interest continues to accrue on all loans.

These options can solve immediate payment issues by giving you breathing room during financial hardship. They’re particularly useful in situations like:

• Temporary job loss or reduced income

• Short-term medical issues

• Unexpected, large expenses

• Transitions between jobs or relocations

But these options come with consequences.

For most loans, interest continues to accrue during deferment or forbearance. When the relief period ends, this interest is often capitalized — added to your principal balance. This increases your overall loan amount and can lead to higher payments in the future.

Both deferment and forbearance are essentially “kicking the can down the road.” They don’t solve underlying financial issues, especially for long-term struggles. This is particularly problematic for private loans with high interest rates. If you’re dealing with variable rates that have climbed to 10-16%, using forbearance can significantly increase your debt over time.

These options are most beneficial when you’re experiencing a truly temporary situation. They give you time to figure things out without defaulting on your loans. But if your financial struggle is long-term — for example, if your income is such that you’ll never be able to pay down your loans — you need to consider more sustainable solutions.

If you do use deferment or forbearance, use this time wisely:

• Reassess your financial situation

• Explore long-term solutions like income-driven repayment plans for federal loans

• Consider refinancing options for private loans, especially if you have high variable rates

While temporary options like interest-rate reduction programs, deferment, or forbearance can provide short-term relief, they don’t address the long-term affordability issue. For sustainable solutions, consider the following options:

For Federal Student Loans

• IDR plans offer long-term payment assistance and lead to loan forgiveness after 20 to 25 years of payments.

• Public Service Loan Forgiveness (PSLF) provides forgiveness after 10 years of payments for those working full-time for government or nonprofit employers.

• A consolidation loan can simplify repayment by combining multiple federal loans into one, potentially opening up additional repayment options and access to different student loan forgiveness programs.

Some states and employers offer Loan Repayment Assistance Programs (LRAPs), but these are often limited in scope and availability.

Related: How to Apply for Student Loan Forgiveness

For Private Student Loans

Private loans typically have fewer built-in protections, but you still have options:

1. Refinancing: The refinance process involves taking out a new loan to pay off existing loans, potentially at a lower interest rate. Refinancing can lower monthly payments or reduce total interest over the loan’s life. However, it typically requires good credit and stable income. Be cautious about refinancing federal loans, as you’ll lose federal benefits and protections.

2. Settlement: In some cases, private lenders may agree to settle your debt for less than you owe, typically if you’re in default or can demonstrate severe financial hardship. While this can significantly reduce your debt, it will likely damage your credit score and may have tax implications.

3. Bankruptcy: Traditionally difficult, discharging student loans through bankruptcy has become more feasible recently. Courts are increasingly considering student loan debt under the “undue hardship” standard. But bankruptcy should be a last resort due to its long-lasting financial impact. If considering this option, consult a bankruptcy attorney experienced with student loan debt.

After helping thousands of borrowers with private student loans, we’ve learned this: There’s no one-size-fits-all solution. Your best strategy depends on the type of loans you have, your income potential, and financial goals.

Struggling consistently with payments, especially on private loans? Be proactive. Don’t wait until you’re in default to explore options.

We’ve seen borrowers gain valuable insights from others in similar situations on Reddit and TikTok. But for complex cases, a student loan lawyer or financial planner can be a game-changer.

Related: Can You Settle Federal Student Loans?

Struggling with student loan payments can be overwhelming, but you have options. Whether you have federal or private loans, there are strategies to make your debt more manageable. The key is to act quickly and explore all available solutions, from income-driven repayment plans to refinancing.

Remember, your best course of action depends on your unique financial situation. If you’re feeling lost or overwhelmed, don’t hesitate to seek expert help. Our experienced student loan advisors can provide personalized guidance to navigate your options and develop a plan that works for you.

Ready to take control of your student loans? Book a 1:1 consultation with one of our student loan experts today. Get the clarity and direction you need to move forward confidently.