Need More Time to Pay Off a Student Loan? Take These Steps

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Brian O'Connell

By Brian O'Connell

August 28, 2019

Most college graduates and their parents have a six-month grace period before repayment begins on their student loans. For students who graduated in May or June, that means payments are due starting in November or December. But, what if you need more time to pay your student loans? There are options that can further delay your student loan payments.

Buying Time

Sometimes, the six-month grace period isn’t long enough.

Maybe you’re still looking for a job after graduation. Or, perhaps you have other financial obligations that must be dealt with first.

If the six-month grace period isn’t enough time for you to start paying your loan debt, there are some effective ways to buy some time and take a break from repaying your student loan debts.

That will give you more time catch up if you need it.

But be aware, buying time before repayment begins will cost you. Interest continues to accrue when you delay the start of repayment. This interest will be added to the amount you owe.

What loan delay strategies work best? Try these ideas on for size.

Give Your Student Loan Servicer A Call

If you’re looking for more time to repay your student loan, even if your grace period is still active, call your student loan servicer to ask about your options.

There are several good reasons for doing so, but the first reason is that it’s just good business. Lenders will appreciate your keeping them in the loop if you’re having financial troubles and will appreciate the transparency. You will have more options if you give them a heads up before you run into financial difficulty than afterward.

When you contact your student loan servicer, they will work with you to get you more time to pay back your student loans.

Look into Loan Deferment or Forbearance

You can also delay paying your student loans via traditional loan management tools called deferment or forbearance.

Loan deferment. With student loan deferment, you can temporarily delay your student loan payments for a specified period of time.

Loan deferment usually occur with subsidized federal student loans, such as subsidized Federal Direct Stafford loans and Federal Perkins loans. Once again, the path to delaying your loan repayments is through your student loan servicer, who will have you fill out a request form to determine eligibility.

Multiple eligibility options exist for student loan deferments, like attending college at least half time, serving on active duty with the U.S. Armed Forces, unemployment, having a serious medical issue and legitimate economic hardship.

During a deferment, you won’t have to pay interest on subsidized loans, which saves you money while buying you some much needed loan repayment time. Interest will continue to be due on unsubsidized loans, but can be added to the loan balance if you are unable to pay the interest during the deferment.

Loan forbearance. Student loan forbearance enables you to also temporarily suspend repayments toward your student loans.

Loan forbearance allows federal student loan borrowers to delay repaying their loans for up to a year at a time and up to three years in total, dependent upon program eligibility. Private student loans typically allow a maximum of a year in forbearance, often in 2-3 month increments.

Eligibility-wise, provide the loan servicer with documentation of the reasons why you need a forbearance. Common reasons include medical emergencies, unemployment, underemployment and other financial difficulty.

Some types of forbearance are subject to the discretion of the servicer while others are mandatory.

Note that with both student loan deferment and forbearance, you’ll need to keep repaying your loan while your application channels through the loan servicer’s approval process.

Change Up Your Loan Repayment Plan

Another way for dealing with financial difficulty is to switch to a loan repayment plan that reduces your student loan payments, giving you some financial breathing room.

Federal student loans provide several different repayment plan options that can yield a lower monthly payment than the standard 10-year repayment plan. These options include income-driven repayment and extended repayment.

Income-driven repayment. Income-driven repayment plans base your student loan payments at a small percentage (10%, 15% or 20%) of your discretionary income.

Discretionary income is defined as gap between your annual income and 150% of the U.S. poverty line, based on your state of residence and family size.

In some cases, especially if you have a large family and aren’t generating much income, you may wind up only paying a few dollars a month on your student loan debt, thus buying you enough time to get back on your feet. If your income is less than 150% of the poverty line, your monthly payment will be zero.

You’ll have to update your income and family size each year to continue in the income-driven repayment plan. If, after 20 or 25 years you still owe money on your student loan debt, and you’re on an income-driven repayment plan, the balance of that debt may be forgiven, although you’ll owe federal income tax on the loan balance that is forgiven.

If you’re interested in an income-driven student loan repayment plan, call your loan servicer and ask for more information on the four types of income-driven repayment plans – Income-Contingent Repayment (ICR); Income-Based Repayment (IBR); Pay As You Earn (PAYE); and Revised Pay as You Earn (REPAYE).

For most borrowers, PAYE will yield the lowest monthly payment. If you aren’t eligible for PAYE, then either IBR or REPAYE will be the least expensive repayment plan.

Extended repayment. Extended repayment provides another option for reducing student loan payments.

There are two types of extended repayment.

The most common version of extended repayment provides borrowers with a 25-year repayment term on their federal student loans, if they owe a total of $30,000 or more in federal student loan debt.

Let’s say you owe $30,000 in total debt on your federal student loans, at an interest rate of 6%. On a 10-year payment plan your monthly payment is $333. Yet, if you extend the repayment term to 25 years, your monthly loan payment falls to $193 a month, reducing your loan payment by $140 per month during the first 10 years in repayment.

With an extended payment plan, note that you’ll likely pay significantly more in loan payments over the life of a 25-year loan than you would with a 10-year loan. For example, on a $30,000 debt at 6% interest, the total interest is $27,987 on the 25-year term versus $9,967 for a 10-year term. That’s the price you pay for buying more time to repay your student loans.

The other type of extended repayment requires the borrower to consolidate their federal student loans first. The repayment term on the consolidation loan is then based on the amount of debt, with $60,000 or more in student loan debt qualifying for a 30-year repayment term.

Student Loan Forgiveness

One harder-to-get but still obtainable student loan repayment aid is through student loan forgiveness.

Eligibility requirements are much more stringent than with deferments and forbearance, as you’ll need to either work for the government or for an approved non-profit organization to qualify for Public Service Loan Forgiveness.

Plus, you can only get full forgiveness relief after making 120 “qualifying” monthly loan payments in an income-driven repayment plan.

Use the Public Service Loan Forgiveness Program Self-Help Tool to see if you qualify for public service loan forgiveness, to submit the correct forms, and to see how the plan might work for you.

A good place to start:

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