Student Loans: Pay Back or Defer?
Making your first student loan payments.
It is time. Your first student loan payment is due. However, you’re faced with a bit of a dilemma: your funds are limited because your job prospects haven’t turned out the way that you expected it would. At least not yet.
Welcome to the world of life after college. It may not be the picture of what you had expected more than four years ago: a good job, perhaps your own place, maybe even a new car. Instead, you’re out of work or underemployed, you’re living at home with your parents and younger siblings, and that 8-year-old car you got while in high school is now 14-years-old and being held together by some duct tape and your prayers.
Life doesn’t always make sense nor is it fair. You’ve done your part, but you now find yourself at a crossroads: you certainly have the will to work, but jobs — good paying ones at that — are hard to find. With your first student loan repayment just weeks away and not enough money to handle payments, you’re searching for options to help you cope. Fortunately, options are available, with varying levels of consequences you must consider.
Seek a Forbearance — If you cannot make payment on your student loan, your lender may grant you forbearance for up to a year. Your student loan contract will spell out conditions of forbearance which generally include unforseen personal problems, poor health or financial problems. Get in touch with your lender, explain your problem and if granted forbearance you’ll need to fill out the proper forms. Forbearance doesn’t stop interest from accumulating, however.
Loan Cancellation — Some student loans can be canceled, but only under extreme conditions. For example, if your parents took out a PLUS loan for you and you died, then the loan can be canceled. If you were recently permanently disabled, payments can be defered and eventually discharged according to the federal student aid website. Some loans can be canceled if your school closed or if the loan was falsely certified by your school. Check the closed school search page to see if your now defunct school is listed.
Teaching Options — New teachers who take jobs serving in low-income or in a subject-matter shortage area may be able to cancel their debt. A Perkins loan can be canceled and a Stafford loan can be forgiven. At minimum, that Stafford loan might be deferrable for up to three years, giving you some time to get your financial house in order.
Personal Bankruptcy — Rarely are any student loans discharged if you file personal bankruptcy. You’ll likely need an attorney to present your case and you’ll have to seek separate court action to have your case heard according to Nolo. Bankruptcy will wreck your credit too.
Family Help — You’re back home with your parents and would prefer to live elsewhere. However, your parents, who have so much vested in you, should be told about your difficulty making payments if they don’t know that already. Mom and Dad may cover your payments for the first few months or a full year, giving you enough time to get on your feet and make future payments. Heck, you can always repay your parents when your financial situation has stabilized, so swallow your pride and ask for their assistance. Be grateful for whatever assistance is offered.
Lastly, you may want to consider certain student loan consolidation options that may be available to you. Consolidation doesn’t solve your problems, but it could buy you some more time and help you refinance your student debt to more favorable terms.