In the last quarter of 2016, the Federal Reserve Bank of New York released a report offering some details on student loan debt. According to the report, which is considered one of the chief reports on household debt in general, just over 11 percent of student loan borrowers were considered past due – by 90 days or more – on their student loans.
In comparison with other types of consumer debt, which have a current delinquency rate of nearly five percent, the report highlights a worrisome trend with regards to student loan borrowers. And it also begs the question: Why are so many borrowers putting their credit at risk when there are numerous student loan repayment and forgiveness options available?
From job loss and long-term disability to high interest rates that make repayment unaffordable, it’s easy to see why borrowers miss their payments. Yet, the causes of these student loan delinquencies don’t matter as much as their solution.
If you find yourself in this position, here are a few ways you can get your payments caught up and get your credit back in good standing before getting yourself into a worse situation: student loan default.
To really get a grasp on where you’re having trouble with repaying your student loans, you should first take a look at your loans to learn more about them. This would include looking at the types of loans you have, who your lenders are, the amount you owe on each loan and when your loan payments are due.
While most of the information about your loans will be available through your lender’s online payment portal or on your most recent statement, you can also check out the National Student Loan Data System for any federal student loans that you’ve been issued.
Once you gain a better understanding of who, what and when you owe, as well as how late you currently are on your payments, you’ll be ready to begin tackling your debt with more clarity.
If you’re more than 15 days late on your student loan payments, your lender will probably send you a notice by email or through some other form of communication to inform you of the delinquency. These notifications will also let you know if any late charges or fees have been added to your missed payment, so they can be combined to your total when you’re ready to catch things up.
When you don’t have the money to make the payment, however, it’s easy to set aside the notice until you have the finances to begin repaying your loans. But doing so can have consequences, especially if you continue to miss your payments for a longer period.
Before creditors start the process of reporting your lateness to the three major credit bureaus, you should contact your lenders to let them know you’re aware of the situation, and you’d like to figure out a way to get your loans current. Otherwise, you could do a lot more than just damage your credit, you could be looking at the added expense of default, and potentially wage garnishments if you’re unable to work out something with your lender.
Federal student loans offer tons of benefits to those who are eligible, so if you’ve only missed a few payments, you might be able to take advantage of these programs once your payments are caught up. From the Public Service Loan Forgiveness (PSLF) program and teacher loan forgiveness programs to student loan discharge and Obama loan forgiveness programs, there may be a way for you to have your debt erased entirely, or at the very least have a substantial portion of your loans forgiven.
If your loans are already in default, meaning they’ve been delinquent for more than nine months (270 days), you also have the option of starting a student loan rehabilitation program to get your loans in good shape. By doing so, you could begin meeting the requirements for the forgiveness programs mentioned above, or set yourself up for more favorable repayment options.
Rather than making payments as part of a standard 10-year repayment plan, you might consider looking at other repayment options that are better suited for your situation. These include income-driven repayment plans that allow you more time to repay the balance on your student loans, which ultimately reduces your monthly payments – and potentially lowers your interest as well.
If you haven’t already explored these options, we recommend taking a look at the benefits each of these programs offer.
For anyone with multiple student loans, consolidation also simplifies the repayment process by converting two or more loans into a single loan, often with a lower or similar interest rate than you currently have. Whether you want to consolidate private loans or federal loans, anything you can do to streamline your payments and cut your costs could help you from becoming delinquent on your student loans.
One thing to remember, however: most of these programs will require you to have your loans in good standing before they can be accessed. Therefore, it’s important to start the process of rehabilitating your loans in advance.
When you’re ready to take control of your student loans, you can speak with a Loan Forgiveness expert by phone at (800) 771-6358 or by filling out our online form to get the process started. Even if your loans aren’t quite ready for a transition into other programs and options, our team can help you decide on which plans will be the most beneficial to you.