Can't Pay Your Student Loans? Here Are 5 Options

Balancing student loan debt and other financial responsibilities can sometimes feel impossible. In a recent survey, 59% of borrowers said that student loan payments caused more stress than other bills, according to The Pew Charitable Trusts. 

If you’re among this majority, and you’re worried that you can’t pay student loans, you have some options. 

1. Reach out to your loan servicer

If you’re in a financially overwhelming situation and can’t pay student loans, contact your lender or servicer ASAP. Generally, lenders prefer to work with, not against, you to find a mutually viable solution. They can clarify your options to help keep your loan in good standing. 

To see a list of all of your federal loan servicers, sign in to your Federal Student Aid (FSA) account and select “My Loan Servicers” in your account dashboard. 

If you don’t know who services your private student loans, you can request a free credit report at AnnualCreditReport.com to access this information and more details about your debt.

2. Switch to an income-driven payment plan

As a federal student loan borrower, you have access to a variety of repayment plans. Some of these plans can help lower your required monthly payment, giving your budget more breathing room.

There are four income-driven repayment (IDR) plans that each have a 10- to 25-year repayment term. All of these plans use your income and family size to calculate your monthly payment amount, and discharge your remaining loan balance after you make the required number of payments. 

• Saving on a Valuable Education (SAVE) plan: Payments are set at 10% of your discretionary income. Depending on the amount you owe, your repayment term can be as little as 10 years.
• Income-Based Repayment (IBR) plan: Payments are 10% to 15% of your discretionary income over 20 or 25 years, depending on when you borrowed the loan.
• Income-Contingent Repayment (ICR) plan: Payments are 20% of discretionary income over 25 years. This is the highest percentage of income of all IDR plans, and it’s also the only plan available to parent PLUS loan borrowers without consolidation. 
• Pay As You Earn (PAYE) plan: Payments are 10% of discretionary income over a 20-year repayment period.

It’s important to note that not all IDR plans have a payment cap. PAYE and IBR payments will never be more than what you’d pay on the 10-year Standard Repayment plan. However, SAVE and ICR don’t cap payments — so depending on your situation, your payment might be higher than what you’re currently paying. 

3. Apply for deferment or forbearance

Deferment and forbearance might be options worth considering if you’re experiencing unemployment or other financial hardship.

• Deferment: As a federal student loan borrower, you might qualify for a deferment program, which postpones your payments temporarily. Direct Subsidized Loans won’t accrue interest in deferment, but Direct Unsubsidized Loans do, and interest capitalizes once you restart payments.
• Forbearance: Federal loan forbearance also postpones payments in the short term. The key difference is that interest accrues on all loan types, but any unpaid interest during this period won’t capitalize. You’re still responsible for the interest charges.

To apply for federal student loan deferment or forbearance, visit your servicer’s website, or contact them via mail, email, or phone.

If you have private student loans: Some private lenders may offer deferment or forbearance options, but their terms can differ. For example, some loan agreements might include a temporary relief clause during unemployment or financial hardship. Contact your lender to see what your options are. 

4. Consolidate your federal student loans

If you’re struggling to make your federal student loan payments, consolidating might offer some temporary relief by helping to lower your monthly bills. 

When you consolidate your federal loans into a Direct Consolidation Loan, you have the option to extend your repayment period up to 30 years. If you have multiple federal loans, consolidation also simplifies repayment by combining your debt into one monthly bill. Your new interest rate would be a weighted average of the rates of the loans you consolidated, rounded up to the nearest one-eighth percent. 

While extending your repayment term through federal loan consolidation might offer some short-term relief, it’s important to note that a longer repayment period typically translates to paying more interest over the life of your loan. 

If you have private student loans: Refinancing student loans may also offer a longer repayment period that helps reduce your monthly payments. If you have great credit, you might also secure a lower interest rate than you got on your original loan. Just avoid refinancing federal loans to keep access to benefits like forgiveness, income-driven repayment plans, and forbearance. 

Find Your Student Loan

5. Explore loan forgiveness programs

Federal student loan borrowers might be able to have a portion of their debt canceled. There are different forgiveness programs available; two popular paths are through income-driven repayment (IDR), or Public Service Loan Forgiveness (PSLF). 

• IDR: If you have a remaining loan balance after making the required number of payments on your income-driven plan, your balance is forgiven.
• PSLF: The PSLF program offers tax-free loan forgiveness after 10 years of qualifying payments on an eligible plan. You must be employed full-time with a government agency or not-for-profit organization, and have qualifying federal loans.

If you meet the PSLF requirements, this repayment alternative can offer tremendous relief.

If you have private student loans: Many states offer forgiveness in the form of loan repayment programs (LRPs). Each LRP sets its own requirements, such as working in underserved areas for a certain period of time, or being employed in certain professions (like health care or teaching). Check with your state’s education department to research LRPs where you live. 

What happens if I don’t pay my student loans?

If you don’t make your student loan payments after a certain amount of time, you’ll risk defaulting on your loan. Federal loans are considered in default if a payment hasn’t been received for 270 days or longer. For private student loans, this time period might be shorter and depends on your lender. 

Loan servicers and lenders can hand over the unpaid debt to a debt collection agency. From here, the collector has a range of options it can use to pursue the debt. This includes taking you to court and potentially having your wages garnished, having your tax refund withheld and put toward the defaulted loan, and reporting your nonpayment to the national credit bureaus, which impacts your credit score. 

Default is a worst-case scenario for your debt. It’s a last resort if you can’t pay student loans, and might be avoidable by exploring the options mentioned above.

Related: How To Get Out of Student Loan Default

There’s a temporary 12-month “on-ramp” breather

Currently, borrowers who can’t pay student loans have a buffer from the consequences of default. The Biden administration instituted a 12-month “on-ramp” period starting Oct. 1, 2023, through Sept. 30, 2024. This time frame gives borrowers time to adjust before making payments again, after years under an administrative pause. 

This temporary layer of protection prevents servicers from marking your loan as delinquent or in default. It also stops missed-payment data from being reported to credit bureaus, and pauses debt collection efforts. 

Bottom line 

The earlier you take action, the better chance you have at keeping your loans in good standing. If you know you won’t be able to make your next student loan payment, contact your lender or loan servicer immediately. They can help you identify the best option for your specific situation.