I'm having trouble paying my student loans. What should I do?
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Answer:
The first thing you need to do is to make your lender aware of your situation. Other options are available to you, but confronting the problem is probably the most beneficial thing you can do.
You can temporarily postpone your loan repayment by requesting either a deferment or forbearance from your lender. Although they are often seen as the same, deferment and forbearance are different options.
With a deferment, your lender grants you a reprieve from your loan payments based on a specific condition such as unemployment, a temporary disability, a return to school, or a similar situation. Your lender can tell you which conditions qualify for deferment. In most cases, the government pays the interest on your loan so the balance does not increase during the deferred period.
With a forbearance, your lender grants you--at its discretion--permission to reduce or stop your loan payment for a period of time. Interest continues to accrue on your loan, and you'll still have to pay off both the accrued interest and the loan when you resume your payments. Although a deferment is preferable, a forbearance is often easier to get because it's not governed by the type of your loan or the date you obtained it.
Deferments and forbearances are usually granted for a six-month period. There is usually a limit to the number of times they are granted during the course of your loan. You'll need to apply for them with the appropriate paperwork from your lender. You may also need to reapply periodically to maintain your eligibility.
You can also try to have your student loan permanently canceled. This means that you don't have to repay it at all because of a specified condition. The loan is permanently removed from your financial obligations. Like a deferment, a cancellation is based on the type and time of the loan in question. However, cancellations don't come easily. They usually involve the borrower's death or permanent disability, or periods of public service such as teaching in needy areas.
If you can't negotiate for a reprieve with your lender, you'll be in default on your student loans. It is important to note that the government now tracks defaults, and this nonpayment can have a negative impact on your future. As a final alternative, you might be able to declare bankruptcy. However, not all student loans can be discharged through bankruptcy, so you'll need to find out if yours can be discharged this way. Keep in mind that bankruptcy is a serious matter and should not be entered into lightly. Talk to a financial professional for more information.
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Stern, Kory, Sreden & Morgan, AAC