Find out what kind of loan you have. Is it a private loan or a federal loan? If it is federal loan, is it a direct loan, a Federal Family Education Loans (FFEL), or some other, less common type? The specific process you need to follow to remedy your student loan issues will depend on what kind of loan you have.
Keep a budget. Track how much you are earning and how much you are spending each month. What are your fixed expenses (food, rent, etc.) and what non-essential expenses do you have?
Contact your creditor immediately. If you are having trouble paying your loans, lenders may reduce your monthly payments for you if they understand your predicament. Failing to pay your loans on the terms you signed onto with your lender will result in default. Default has serious consequences.
Try to defer or delay the repayment of your loan. Both government and private lenders offer deferment options in cases deemed justified by the lender, such as: unemployment, economic hardship, military deployment, or internships.
The government also offers debt forbearance in certain cases where people are having trouble paying their federal student loans. Forbearance enables borrowers to reduce their payments or extend the period for making payments.
Consolidate various loans into a single loan. This can offer certain benefits such as simplifying the payment process, fixing variable interest rate loans, and lowering your monthly payments. Consolidation can also help if you are no longer able to defer payment. Be aware that consolidation can be costly, as some services require additional payments. If you have a direct or FFEL student loan, the government's loan consolidation service may be able to help.
A debt management plan (DMP) can help you develop money management skills and ensure that a portion of your income gets to creditors at regular intervals. Credit counselors manage your DMP, and in some cases, can negotiate with your creditors to cancel certain fees or reduce your interest rates.
Debt negotiation services can help you persuade creditors to reduce what you owe. However, this can be a costly option. Although many negotiation companies describe themselves as "non-profit", before you use a negotiation company, the Federal Trade Commission recommends you investigate them through your state Attorney General, local consumer protection agency, and the Better Business Bureau.
Bankruptcy is usually the last option debtors turn to. If you file and are granted bankruptcy status by a judge, your debts may be canceled, and any garnishment or debt collection actions will likely cease. However, there are a number of downsides to filing for bankruptcy.
It will remain a blemish on your credit report for more than 10 years, and may prevent you from obtaining credit, getting insurance or even a job. Your assets may be seized and you will probably end up with fees owed to the bankruptcy trustee or attorney who helped you determine whether you were eligible for bankruptcy and who represented you in court.
Special Cases
A new Income-Based Repayment (IBR) option for lower-income people with federal student loans allows them to establish payment caps based on their income or family size. IBR usually ensures payments stay below 10 percent of your income. IBR also allows for debt cancellation after 25 years of payment.
Recipients of government student loans may be eligible for special debt deferment or cancellation services, depending on employment. For example, teachers (References 2) who have worked in low-income areas for more than five years may be able to cancel or defer their student loans. Other public service professionals may enjoy similar breaks.