Apply for a deferment. Graduates who encounter financial difficulties can defer, or suspend, their loan payments for up to three years depending on the program. Borrowers should apply for a deferment before the end of the grace period–the six to nine month period former students receive before they have to start paying back loans–otherwise they’ll have to start making loan repayments until the deferment is approved. Be persistent; although many lenders encourage students to apply for a deferment online, try it over the phone. My theory is that it’s harder to tell someone no once you actually hear their sob story.Â I know: cheesy, but true. A friend of mine had to call her lender several times for deferment. Remember, in many cases, “noâ€ doesn’t necessarily mean no, it just means try harder.
Apply for loan forbearance. Similar to a deferment, a forbearance allows borrowers to suspend loan repayment after the grace period for up to three years, but interest continues to accrue, even on subsidized loans. “A deferment or forbearance should be for a temporary problem not for a long-term problem,â€ Kantrowitz says. Since you can end up suspending loan repayments for up to six years, your loan balance can end up skyrocketing due to accruing interest, digging graduates into a deeper financial hole.
Look for alternative repayment options. A new income-based repayment plan is perfect for borrowers who work but don’t make enough to pay the minimum monthly installments. Repayments options are based on a percentage of your discretionary income rather than the total amount of your loans. Here’s the kicker, your debt is forgiven after 25 years in this in program. For those working full time in the public service sector–fireperson, police officer, librarian etc.–your debt is forgiven after 10 years. The program goes into effect July 1. Check out Sallie Mae’s online worksheet to determine whether you’re eligible.
For more on repaying your students loans check out:
Consumer Law Center’s Student Borrowers Assistance Center
Federal Student Aid’s Ombudsmen
Renita Burns is the editorial assistant at BlackEnterprise.com.