What Do You Do When You Can’t Afford Your Student Loan Payments?

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What do you do when you can’t afford your student loan payments? This is becoming a more common question in an uncertain economy. Jonathan recently asked: I cannot afford my student loans due to my job is doing away with full-time work and only offering part-time work. I pay $200.00 a month, but with my…

What do you do when you can’t afford your student loan payments? This is becoming a more common question in an uncertain economy. Jonathan recently asked:

I cannot afford my student loans due to my job is doing away with full-time work and only offering part-time work. I pay $200.00 a month, but with my new position I can only afford $100.00 a month. I have tried to renegotiate the terms of my student loans however they will not work with me at all. How will my credit be affected?

Thanks for the question, Jonathan.

What should you do when you can’t afford your student loan payments?

I’m sorry to hear about your job going down to part time. Unfortunately, cutbacks are becoming more and more common in our current economy, as many companies are trying to cut back. Here are a couple answers, and I will chime in at the end:

From Pinyo @ Moolanomy.

I am sorry about your job. Unfortunately, if you can’t repay your loan according to the contract, your credit score will be affected — not to mention all the other fees that you’ll end up paying. In any case, you seem convinced that you can’t make the $100 extra payment to cover your debt obligation. However, I am not and I want to encourage you to think outside the box.

First, are you sure there’s nothing else that you can cut to save money for the time being? There are things that many of us pay for on a monthly basis that we take them for granted, and these things can add up to a lot of money. For example, cable television (or satellite), cellphone, magazine subscriptions, gym membership, club dues, etc. Take a serious look at your monthly expenses and ask yourself if you really need everything that you spend money on.

From Glblguy @ Gather Little by Little.

While I am not real knowledgeable about student loans, I do listen to Dave Ramsey frequently. When people call into his show and pose similar questions, the first thing Dave always recommends is to ask for a forbearance or deferral.

Both will allow you to temporarily stop making payments on your student loan. The difference is that with a forbearance, interest will continue to accrue even though you aren’t making payments. With a deferral, both the interest and your requirement to make a payment will temporarily be suspended.

Here is a really good article that explains how to defer a student loan and provides some detail on the requirements for both a deferral and forbearance.

If for some reason neither of these is an option, than you’ll need to be more creative. You don’t offer any details on your income and expenses, but as Pinyo suggested, I’d take a really hard look at your expenses and trim them where you can. Look for opportunities where you can save money. Do you have some things you can sell to build up a bit of a buffer to help you out? How about getting another job to supplement your income?

I think you have a number of different options you can explore. Situations like this are the primary reason I I stress the importance of income diversity. Not only will this potentially help your current situation by providing some extra income, it will help you weather future storms as well.

My thoughts:

I would definitely look into getting a forbearance or deferral if possible. One way to get a student loan deferral is to take more classes. Your student loans should be put on hold while you are attending school. Some community colleges are very inexpensive, and it may cost you around $100 per month to take a course – delaying your student loan payments and keeping your credit score intact. However, if the classes are more expensive that what you can easily afford, you might have to take on additional debt, so be careful about that. You don’t want to add to the problem.

Earn more money. Another option is to earn more money to help you bridge the $100 per month gap that you are experiencing. You can do this by taking another part time job, doing freelance or consulting work, babysitting, doing yard work, working as a personal trainer, or a host of other ideas. Alternative income can be a great way to help you during rough financial times and can even be a form of insurance against losing part of your main income stream.

You credit score is important. If you don’t make your student loan payments, your credit score will be affected and you will have to work extra hard to improve your credit score. Maintaining a good credit score can have a positive financial impact, so I recommend doing what you can to keep it up.

Do what is best for you. There are a lot of good ideas here: look for ways to save money, try to earn more money, or ask for a forbearance or a deferral. In the end, you will need to find a solution that works for you and your situation. I wish you the best of luck.

Related Post: 

How to Pay Off Your Student Loans So You Can Get On With Your Life

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. Fonda says

    Hi Ryan, I’ve been searching for information on student loan deferment because I expect to be leaving the states for about 4-5 months. I am in the process of starting up a nonprofit organization (oddly enough) that will provide scholarships to young women whose families can not afford to send them to secondary school. I need to leave the US to go to the country where the program will begin, in order to meet with the population the nonprofit will serve, and network with professionals. I don’t want to defer my loans for that long, maybe up to a year at the most while trying to get the nonprofit going. Is it possible to qualify for loan deferment with this situation? Thank you for your help!

    • Ryan Guina says

      Fonda, the best thing I can do is recommend contacting your lenders and explaining the situation. Each lender has different policies.

  2. Kristy Lynn Engert says

    I’m asking for a forbearance and the declaration letter for Remington college please help me out

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