Repayment Relief Options for Your School Loans

It is extremely important to stay on top of your monthly student loan payments. Falling behind in these payments carries significant consequences. Those who default on their loans will find that their credit rating will suffer. Additionally, one's wages could be garnished, additional costs could be incurred and tax refunds could be seized.

If you find yourself struggling every month to make your student loan payments, there are options that can assist you.

School Loan Consolidation

Consolidating, or combining, your multiple student loans into one loan offers several benefits, including a lower monthly payment that might be more manageable for the borrower. Additionally, many find it much easier to keep track of one monthly due date versus several different due dates each month.

Deferment

Deferment allows certain borrowers to temporarily cease loan payments without incurring interest on the loan. In order to qualify for deferment, a borrower must meet certain criteria, such as serving on active duty in the military or returning to school for additional studies. Borrowers who are facing economic hardships, such as being laid off from one's job, also might qualify.

Forbearance

If you are still struggling to make your monthly loan payments, but do not qualify for deferment, you can appeal for a forbearance, in which a temporary hold is placed on your loan payments. However, unlike deferment, interest does continue to accrue for loans that are in forbearance status.

Other Options

For borrowers who have federal Stafford or PLUS education loans, there are several additional repayment options that can assist in meeting one's monthly financial obligations.

Often the least expensive repayment option, Standard Repayment provides the borrower with a 10-year repayment term for the student loan. However, if you find that your loan payment exceeds your gross monthly income by 8 to 10 percent, you also can consider the following repayment options:

Graduated Repayment: Through this option, monthly loan payments start off low and increase over time. This repayment option might be viable for a borrower who anticipates his or her income to increase in the future. The maximum repayment term under this option is 10 years unless you are consolidating several federal loans into one.
Income-Sensitive Repayment: This option takes into consideration the borrower's income when determining the minimum monthly payment. Under this repayment option, the repayment term could be extended from 10 years to 15 years. While this alternative plan provides a lower monthly payment, the total interest paid will be higher that it would be under a standard repayment plan.
Extended Repayment: If your total outstanding student loan balance is more than $30,000, you might qualify for this repayment plan. Under this option, the borrower can extend the loan's repayment term to up to 25 years. In addition to the amount of one's loan, this option is available only to those who did not have a balance on a FFELP loan as of October 7, 1998, or received a FFELP loan after October 7, 1998. Through this option, total interest paid on the loan is typically higher than it would be under a standard repayment plan.
Income-Based Repayment: Starting July 1, 2009, borrowers have an additional option to consider. If total loan payments for the year are greater than 15 percent of a borrower's "discretionary" income, this plan would reduce the monthly loan payments, bringing them within the 15 percent mark.

If any of these terms confuse you, learn what they mean in the terms to know section we have provided on this site for your benefit.