Hero Images/Getty Images
Whether you are worried you won't be able to make your 1st student loan payment, are experiencing sudden financial stress or have been struggling for years to come up with the funds to repay your college tuition debt, you're not alone.
The typical college graduate has 8 to 12 loans after 4 years.
More than 25% of student loan borrowers were in default in the fall of 2015, according to estimates by the Consumer Financial Protection Bureau. Help for personal student loan crisis is available, but your options depend on whether the money you owe is due to federal or private loans.
"A lot of borrowers, particularly if they're young, think if they ignore the problem it will go away," says David Levy, editor of Edvisors.com, a site that provides college financing information. "The best thing you can do as a borrower is to talk to your lender before you skip a payment. Lenders tend to be more flexible if you reach out to them before you're in default."
RATE SEARCH: Find low personal loan rates at Bankrate.com.
Get organized and then seek help
The typical college graduate has 8 to 12 loans after 4 years, and about one-third of borrowers miss their 1st student loan payment, Levy says.
"It's essential to get organized and to make a list of your loans, note whether they are private or federal, write out the interest rates, the balances owed and the due dates along with the contact information of each loan servicer," says Jodi Okun, president of College Financial Aid Advisors. "Call each servicer if you're having trouble and find out what your options are."
The National Foundation for Credit Counseling recently initiated a student loan counseling program to help people navigate the decisions they must make about loan repayment options.
"About 40% of our clients have student loans that are causing them financial difficulties, with an average balance of $33,000," says Matt Ribe, director of legislative affairs and corporate security for the NFCC. "We can help them review their repayment options in the context of their overall finances."
Ribe warns borrowers to avoid for-profit companies that charge fees to help student loan borrowers.
"You can sign up for income-based repayment plans for free," he says. "Those companies don't help borrowers come up with a budget and a long-term financial plan."
The NFCC's site for student loan borrowers is www.studentloanhelp.org.
Okun says borrowers can go to their college financial aid office for advice, even after they've graduated for advice.
Short-term or long-term financial problems
Edvisors' Levy says if you have difficulty repaying your student loans due to a short-term problem such as a medical leave from your job or a brief period of unemployment, suspending your loan with a forbearance or a deferral could be a valid solution.
- Alternative repayment plan
- Loan forgiveness
Both options temporarily stop your payments if you can prove financial hardship, although interest continues to accumulate unless you have a subsidized federal student loan.
"If you're having long-term problems, forbearance or a deferral aren't good solutions, because your interest payments continue to accrue, and you're digging yourself deeper into a financial hole," Levy says. "If you defer your loan, in 10 years you'll double the total payment you'll have to make over the life of the loan."
A better solution is to discuss an alternative repayment plan, in which you reduce your monthly payments by increasing the term of the loan, he says. Still, this solution will increase the interest you pay over time.
Ribe says that while it's tempting to choose a short-term solution for expedience, it's much smarter to formulate a long-term strategy for repaying your student loans.