7 Options When You Can't Pay Your Student Loans

Nurse practitioner programs can be quite costly, ranging anywhere from $15,000 to $90,000, depending on the school, number of credits, and whether you have in-state or out-of-state tuition. Not to mention, you’ll also be responsible for covering the costs of textbooks, room and board, and other costs for living. Although you may be able to continue working while enrolled in your NP program, chances are you’ll still need to find a way to help pay for your education. Fortunately, federal and private student loans can alleviate some, if not all, of the costs. Since you won’t have to make any payments for the first six months after graduation, it may be your best option for making your NP dreams a reality.

If you receive student loans for more than one semester of your education or obtain both private and federal loans, you’ll likely have multiple loan servicers. Given that each will require its own payment at different times a month for varying amounts, things could add up pretty quickly. Should you find yourself in a situation where you can’t afford to pay your loans back, it could be tempting to miss a few payments here and there so you can make ends meet. But defaulting on a loan can bare much more serious consequences than just taking a hit on your credit score. Balances could become due immediately, your wages may be garnished, and your federal benefits like social security and tax refunds could be seized. The loan servicer might even take you to court over the matter, landing you worse off than before.

Despite weighing the hefty repercussions and evaluating your budget, you may still find paying back your loans impossible to do. Fortunately, even if you’ve already defaulted, there is still hope. Here are seven options to consider if you can’t pay your student loans.

1. Contact your lender

Federal and private loan servicing companies make money when you adhere to the terms of your financing agreement and pay them back. Believe it or not, they actually lose money if you default and they have to track you down for your payments. So it’s often in their best interest to work with you if you’re having trouble with your current repayment plan and thus in your best interest to contact them to see how they might be able to help.

In some cases, private lenders may not be obligated to work with you, so there is no guarantee they will but you won’t know if you don’t try. Even if you can’t work out a solution together, it’s important that they are notified you can’t make your payments and that you continue to stay in touch with them as you seek out other alternatives. If your loan does end up in collections, you may still be able to work out a new payment plan with the collector or settle the debt by negotiating a lump sum payment.

2. Enroll in an income-driven repayment plan

If you have a federal student loan, when it was first granted to you, you were automatically assigned to the Standard Repayment Plan (SRP) unless you made other arrangements ahead of time. The SRP is designed to pay off your debt in 10 years and is the fastest and least expensive way for doing so, however, it carries the highest monthly payment. Many borrowers of federal loans don’t realize they have the option to switch their plan at any time and can do so by simply contacting their loan servicer.

One of the most popular options for lowering your monthly payments on a federal student loan is with an income-driven repayment plan, offered by U.S. Department of Education for borrowers. Under an income-driven repayment plan, the monthly payment is based on an amount that is intended to be affordable based on your income and family size, and any remaining balance on your Federal student loan may be forgiven if it is not fully repaid at the end of the repayment period, which is either 20 or 25 years.

Although income-driven repayment plans are an efficient way to lower payments on federal student loans, it's important to note that the benefits will ultimately increase the amount of interest you pay over time and there may be tax consequences if and when you receive loan forgiveness.

3. Consider consolidating

If eligible, a Direct Consolidation Loan (DCL) will allow you to roll several federal student loans into one, new loan with a lower interest rate and a single, low monthly payment by stretching your repayment period to 30 years. DCLs will only consolidate federal student loans, so private student loans are not eligible for this option; however, if you have a mixture of federal and private loans, you can still consolidate them together under a different consolidation service other than the DCL.  

As with any type of loan consolidation, you are essentially restarting and ultimately extending your repayment period so over time you will pay more interest. You may also lose the benefits that were offered with the original loans like interest rates discounts and loan cancellation benefits.

4. Check to see if your eligible for loan forgiveness

If you received a federal student loan under the William D. Ford Federal Direct Loan Program, you may be eligible for the Public Service Loan Forgiveness (PSLF) program. The PSLF program forgives the remaining balance on the loan after you’ve made 120 qualifying payments under your repayment plan while also working full-time for an eligible employer. Fortunately, eligibility is not specific to the job that you do for your employer but rather who your employer is. Qualifying employment organizations include government organizations and certain not-for-profit organizations including both tax-exempt and non-tax-exempt, so long as they provide qualifying public services, including public health.

5. Consider deferment or forbearance

If you’re facing an economic hardship, are unemployed or having trouble finding employment, you may be able eligible to deferment or forbearance of your federal and private student loans, both of which temporarily postpone your payments for a period of time. Generally, it’s up to the loan servicer to decide if you’re approved for a general forbearance, but you may qualify for a mandatory forbearance depending on your situation, for which the loan servicer has to comply.

Deferment and forbearance are something you have to request outright from your lender, and it’s important that if you do, you continue to make your payments until you’re approved for such. Under some types of federal loans, the government may pay the interest for you during a deferment period. If not, the interest will continue to be charged on the loan and added to your principal balance, which will make your future payments higher when the deferment or forbearance period is over. So it's best that with either of these options, you continue to pay the interest if you’re able to.

6. Refinance private student loans

Similar to adjusting your repayment plan for federal loans, refinancing private student loans can provide you with a little financial relief by lowering your monthly principal and interest. However, qualifying for a refinance can be difficult if you’ve defaulted but there are lenders who are willing to overlook certain circumstances.

7. Consult a student loan lawyer

If you’re struggling to pay off your loans, are in danger of or have already defaulted, it may be in your best interest to consult with a student loan lawyer who can help you figure out the best course of action and help you understand your rights as a borrower. Because debt collectors have to adhere to strict regulations when trying to recoup payment from borrowers, attorneys can help you dispute invalid claims of default, negotiate settlements on your behalf and deal with debt collectors who may be acting illegally. They can also help you determine your actual liabilities as well as how you might be affected by state laws.

Before you consider filing bankruptcy as an option, it’s important to understand that under current legislation, discharging student loans under such is almost impossible to do and you must be able to show that the burden of repayment imposes extreme hardship on you.

Debt is a heavy burden to bear but fortunately, it doesn’t have to be a hopeless one. If you’re struggling to repay your student loans, always start by contacting your loan servicer to discuss your options. If you do default, spend some time figuring out what your next steps should be in order to start rebuilding your finances.