How to Avoid Late Payments on Student Loans

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Mark Kantrowitz

By Mark Kantrowitz

September 20, 2019

There are several simple ideas that can help borrowers avoid making late payments on their student loans. These ideas include signing up for auto-debit, using text alert reminders, budgeting, changing the payment due date, changing the repayment plan, increasing income, deferments and forbearances.

How to Deal with Scheduling Challenges

The easiest way to avoid late payments is to sign up for auto-debit, where the monthly student loan payments are automatically transferred from the borrower’s bank account to the lender. Some lenders will even give you a slight interest rate reduction as an incentive.

If the borrower is sometimes late because they are disorganized, ask the loan servicer about signing up for text alerts a few days before the payments are due. It can also help to add the payment due dates to your calendar. Consolidating the loans may also streamline the repayment process.

Another option is to ask the lender to change the payment due date. Sometimes it can be easier for borrowers to repay their student loans if the due date is a few days after the borrower gets paid, as opposed to a few days before.

How to Manage Income Shortfalls

Financial literacy counseling can help the borrower create a budget, avoid overspending and learn how to spend within their means. Ask the college’s financial aid office and the lender for recommendations. Some may even have free webinars to teach you the basics.

If the difficulty is caused by the amount of the payment, as opposed to the timing of the payment, the borrower should ask the lender about alternative repayment plans. Extended repayment and income-driven repayment plans can reduce the amount of the monthly payment by stretching out the term of the loan. This will increase the total payments over the life of the loan, but that’s better than defaulting on the loan.

Alternately, the borrower can look for ways to increase their income, such as working a second part-time job in the evening or weekends.

How to Handle Temporary Financial Problems

If you know that you will have difficulty making the payment on time, call the servicer in advance to ask about your options. Some servicers will allow you to postpone your payments through a deferment or forbearance. Deferments and forbearances temporarily suspend the repayment obligation.

Interest may continue to accrue during a deferment or forbearance, so this is best for a short-term financial difficulty, such as medical or maternity leave.

Some lenders offer a partial forbearance which offers interest-only payments for a period of time.

A deferment or forbearance is better than late fees and a negative report to the credit bureaus.

Ignoring the problem will only make it worse.

What to Do after You Miss a Payment

If you do miss a payment, make the missing payment ASAP. Bringing the account current will avoid paying too much extra interest and repeat late fees.

If this is the first time you’ve been late with a payment, call the servicer to ask them to waive the late fee. Be apologetic about missing the late payment.

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