4 Ways to Pay Your Student Loans When You Have No Money

4 Ways to Pay Your Student Loans When You Have No Money

Does federal student loan debt have you doubting that you’ll ever be able to move out of your parent’s house, let alone buy your own house? Unfortunately, your situation isn’t unique.

student loan debtAccording to the Federal Reserve Bank of New York, over 37 million people have outstanding student loans totaling over $870 billion. According to the Project on Student Debt, roughly two-thirds of the graduating class of 2011 took out some type of student loan to pay for their education, averaging about $26,600. Meanwhile, unemployment numbers for those fresh-out-of-college folks remains high. That combo is frightening to the many people with mounting student loan debt. And rightfully so.

The worst thing you can do, however, is ignore your student loans and hope they go away. They won’t.

Fear not. There are a few tips, tricks, and resources that can help you keep afloat even when it feels like you’re drowning in student loan debt.

1. Deferment: Borrowers automatically get a six month grace period immediately upon graduation. After that, it’s up to you to apply for a deferment. You can qualify for a deferment for reasons such as unemployment, graduate school enrollment, or military service. You still pay interest, though, which adds up. For more info on how to apply, check out the National Student Loan Data System (NSLDS).

2. Forbearance: If you don’t qualify for a deferment, you might still be able to apply for forbearance. In order to receive a forbearance, you have to be experiencing “financial hardship,” and you might be required to provide supporting documentation of the hardship. Forbearance can last up to 12 months. Similar to a deferment, you still rack up interest during the time you aren’t required to make payments. For more information on how to apply for forbearance, visit the NSLDS site.

3. Income-Based Repayment: What this means for most of you is that payments are capped at 15 percent of your income. For 1.6 million people, Income-Based Repayment is capped at 10 percent of discretionary income. While it might reduce monthly payments, it may also extend the duration of repayment, which increases the accumulating interest. To find out if the Income-Based Repayment plan is right for you, visit Federal Student Aid.

4. Loan Forgiveness: Do you know about this program? “Loan forgiveness” as in, “so long, student loans!” If you work full-time in the public service sector, you might qualify for Public Service Loan Forgiveness. After making 120 qualifying payments, the balance of your student loans will be forgiven. Public service organizations include government organizations and not-for-profit, tax-exempt organizations. Some qualifying jobs within those organizations include public librarians, early childhood educators and public school teachers. Many more jobs qualify, but there are a lot of rules and technicalities. Be sure to do your research. To learn more about public service loan forgiveness, visit the Federal Student Aid website.

Other Student Loan Resources

60+ Ways to Get Rid of Your Student Loans (Without Paying Them) (eBook from saltmoney.org)

Student Loan Borrower Assistance

National Council of Higher Education Resources

Federal Student Aid

The bottom line is this—if you’re struggling to make payments, tell your federal student loan lender. It should be your first call, and you’ll likely be surprised by their eagerness to work with you.