Introduction Paying For and Selecting a College Federal Loans, Private Loans, and How to Tell the Difference Repayment Plans Student Loan Servicers and Ombudsman Offices COVID-19 and Student Loan Repayment If You Can't Repay Your Loan Loan Consolidation Programs Loan Cancellation/Forgiveness Programs If Your Loan Defaults Collection Activities Additional Information and Assistance Glossary Index of Resources
If You Can't Repay Your Loan
Circumstances may arise that make repayments difficult. Your loan servicer is supposed to help you understand your options for keeping your loan in good standing. Options to keep your loan in good standing when you are having difficulty making the monthly payments may include:
If your income and/or household expenses make it difficult or impossible to repay your federal student loans, you should inquire with your servicer about whether you should be in a different repayment plan. You should ask your servicer about income-driven repayment plans that are described in this Handbook and are based on your income. If you are already in an income-driven repayment plan and you had a recent drop in income or increased the size of your household, you should update your information with your servicer to allow your monthly payment to be adjusted. Private lenders have fewer options for repayment based on financial hardship, but you should ask your servicer what is available.
If you are experiencing a short-term hardship and can’t make your scheduled loan payments, your loan servicer may be able to grant you a forbearance. A forbearance may allow you to stop making payments or reduce your monthly payment for up to 12 months. But know that while your payments may be suspended or reduced, interest will continue to accrue on your federal loans. The months in which you are on forbearance also will NOT count towards any federal student loan forgiveness programs.
In certain circumstances, you may be able to postpone paying back your student loans by obtaining a deferment. For unsubsidized loans, interest will accrue during a deferment. The type of loan and date the loan was incurred will affect your deferment options, if any. You can get deferments for most federal student loans in the following circumstances:
- In-school for at least half-time study;
- Graduate fellowship;
- Rehabilitation training program;
- Unemployment, not to exceed three years;
- Economic hardship, granted one year at a time for a maximum of three years; and
- Military service.
To apply for a different repayment plan, forbearance, or deferment, contact your loan servicer. The months in which you are on deferment will NOT count towards any federal student loan forgiveness programs.
Private and non-federal loans may or may not have deferment or forbearance options, and the rules vary among lenders. Many private lenders offer deferments for certain circumstances. It is best to discuss these options with your loan servicer as early as possible. For private student loan deferment or forbearance, terms and fees can vary. Your options for deferment or forbearance of private loans may not be as borrower-friendly as the federal program options.
If you have private loans that are unaffordable. You may wish to consider refinancing your loans into a loan that has a lower interest rate. Some Minnesota residents may be able to refinance their private student loans into a lower interest rate loan offered by the State of Minnesota’s “SELF Refi” program. For more information about that program, you can contact the Minnesota Office of Higher Education or visit its website: www.selfrefi.state.mn.us