One of the most challenging parts of college - and perhaps the single most difficult part of college for many people - is finding the funds to pay for it. Many people opt for federal student loans because they are fairly easy for college students to secure. However, after college is over payments must be made on the loans until they are paid off. In some cases, repayment may become a challenge due to lack of employment or other reasons. If you find yourself unable to pay your federal student loans back on schedule, look over the following options. There might just be a solution!
Does Your Loan Qualify as a Federal Student Loan?
The most common kind of student loans are federally funded ones. You have a federal student loan if the Department of Education is the official lender or guarantor of the loan. The typical federal loans include:
- Stafford Loans
- PLUS Loans
- Perkins Loans
- Direct Loans
If you have one of the federal student loans and can't make the payments on it, it is important that you take action as soon as possible. There is usually a solution as long as you are willing to make some effort.
The Income Driven Repayment Plan
You may be able to enroll in an income-driven repayment plan that is based upon how much money you're making. The payments will remain the same until the loan is repaid, and they will be calculated to stay within your budgetary constraints. This plan compares your family size to your income. Larger families with low incomes will easily qualify, but even single people with very low income can qualify for this repayment plan.
The Pay As You Earn Repayment Plan
The "Pay As You Earn" plan is another possibility for people who can't pay their federal student loans back. This plan is similar to the income-driven plan in the fact that it allows lowered student loan payments, but it is different in one very significant way: The Pay As You Earn plan has adjustable payments. This means that as your earnings increase, your student loan payments will increase. Pay As You Earn repayment plans require you to pay a maximum of 15 percent of your monthly discretionary income. One of the most significant (and attractive!) features of this plan is that any outstanding balance after 20 years of consistent monthly payments is forgiven.
If payments on your federal student loan are going to be a problem, tackle the problem as soon as possible. Contact a consumer finance center to explore the options discussed above. This will help keep your credit rating - and your ability to get future student loans - intact!Share