Who Should You Contact if You Have Trouble Making Payments Once You Leave School?

Graduating from school is a major milestone, but it also comes with new responsibilities, including managing your student loan payments. Have you ever found yourself wondering, “What should I do if I can’t keep up with my loan payments?” If so, you’re not alone. Many graduates face financial challenges, but the good news is that help is available. This blog will guide you through the steps and resources to turn to if you have trouble making payments once you leave school. Let’s dive in!

Understanding Your Loan Types and Terms

Before contacting anyone, it’s crucial to understand the type of loans you have. Federal loans and private loans have different terms, repayment options, and assistance programs.

Federal Student Loans

Federal student loans are provided by the government and include Direct Subsidized Loans, Direct Unsubsidized Loans, and PLUS Loans. They offer various repayment plans, deferment, and forbearance options.

Private Student Loans

Private student loans are issued by banks, credit unions, and other private lenders. They generally don’t offer as many repayment options as federal loans, making it essential to know your specific loan terms.

Contact Your Loan Servicer

Your loan servicer is the company that handles your billing and other services for your federal student loan. They are your first point of contact if you’re having trouble making payments.

Federal Loan Servicers

For federal loans, your servicer can help you explore different repayment plans, such as Income-Driven Repayment (IDR) plans, which base your monthly payment on your income and family size.

Private Loan Servicers

Private loan servicers might offer different options. Some might allow you to temporarily pause payments or reduce the amount you owe each month. It’s essential to communicate with them early to understand your options.

Exploring Repayment Plans

One of the first steps in managing your student loans is to explore different repayment plans. There are several options available for federal student loans, and knowing which one suits your financial situation can make a big difference.

Income-Driven Repayment Plans

Income-Driven Repayment (IDR) plans adjust your monthly payments based on your income and family size. These plans can significantly reduce your monthly payment and extend your repayment period to 20 or 25 years.

Standard Repayment Plan

The Standard Repayment Plan sets your payments to ensure your loans are paid off within 10 years. This plan might not be ideal if you’re struggling financially, but it results in less interest paid over time.

Graduated Repayment Plan

The Graduated Repayment Plan starts with lower payments that increase every two years. It’s a good option if you expect your income to grow over time.

Extended Repayment Plan

The Extended Repayment Plan allows you to extend your repayment period up to 25 years, reducing your monthly payment. However, you’ll pay more interest over the life of the loan.

Deferment and Forbearance

If you’re facing temporary financial hardship, deferment and forbearance might be options to consider. These allow you to temporarily pause or reduce your payments.

Deferment

During deferment, you can temporarily stop making payments on your federal student loans. Interest may not accrue on certain types of federal loans during deferment, such as Direct Subsidized Loans.

Forbearance

Forbearance allows you to temporarily reduce or stop making payments on your loans. Interest will continue to accrue on all types of loans during forbearance, which can increase your total repayment amount.

Public Service Loan Forgiveness (PSLF)

If you work in the public sector, you might be eligible for Public Service Loan Forgiveness (PSLF). This program forgives the remaining balance on your Direct Loans after you’ve made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.

Eligibility Requirements

To qualify for PSLF, you must:

Work full-time for a government or non-profit organization
Have Direct Loans
Make 120 qualifying payments under an IDR plan

Applying for PSLF

To apply for PSLF, submit the Employment Certification Form annually or when you change employers. After making 120 qualifying payments, you can apply for loan forgiveness.

Refinancing Your Loans

Another option to consider is refinancing your loans. Refinancing can lower your interest rate, reduce your monthly payments, or shorten your repayment term.

Pros of Refinancing

Lower interest rates
Reduced monthly payments
Simplified payments by combining multiple loans into one

Cons of Refinancing

Loss of federal loan benefits (e.g., IDR plans, PSLF)
May require a good credit score and stable income

Seek Help from a Financial Advisor

If you’re overwhelmed by your options, consider seeking help from a financial advisor. They can provide personalized advice based on your financial situation and goals.

Benefits of a Financial Advisor

Tailored financial planning
Help with budgeting and managing debt
Guidance on loan repayment and refinancing options

Finding a Financial Advisor

Look for a certified financial planner (CFP) or a professional with experience in student loan management. You can find advisors through recommendations, professional associations, or online directories.

Utilize Non-Profit Organizations

Several non-profit organizations offer free or low-cost assistance with student loan repayment. These organizations can provide counseling, help you understand your options, and assist with paperwork.

Examples of Non-Profit Organizations

National Foundation for Credit Counseling (NFCC)
Student Loan Borrower Assistance
The Institute of Student Loan Advisors (TISLA)

Services Offered

These organizations offer services such as:

One-on-one counseling
Assistance with loan consolidation and repayment plans
Educational resources and workshops

Stay Informed and Proactive

The key to managing your student loans is to stay informed and proactive. Keep track of your loan details, repayment status, and any communications from your loan servicer.

Tips for Staying Informed

Regularly check your loan statements and balances
Keep your contact information updated with your loan servicer
Sign up for alerts and reminders from your loan servicer

Proactive Steps

Contact your loan servicer at the first sign of trouble
Explore repayment plans and assistance programs early
Consider additional sources of income or cost-cutting measures to stay on track with payments

Conclusion

Navigating student loan repayment can be challenging, but you don’t have to do it alone. Whether you’re considering different repayment plans, seeking deferment or forbearance, or looking into loan forgiveness programs, there are resources available to help you. Reach out to your loan servicer, explore your options, and don’t hesitate to seek professional advice if needed. By taking proactive steps and staying informed, you can manage your student loans effectively and work towards a brighter financial future.