7 Options if You Can’t Pay Your Student Loans

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If you're struggling to make your student loan payments, there are several steps you can take to address the problem. Options include reducing expenses, increasing income, getting on a different repayment plan and more.

Depending on the type of student loans you have, here are some of the alternatives that you can consider.

1. Reduce Your Expenses

If your budget is tight, take a look at where your money is going and how you may be able to cut expenses in certain areas. For example, you may have some unnecessary recurring charges, such as a streaming service or a gym membership that you rarely use.

You may also be able to look at other discretionary spending, such as eating out and entertainment, to see where you can reasonably save some money. Even with fixed expenses, there may be some options available. For example, you can shop around for car insurance to make sure you're still getting the best rate or even take a defensive driving course to get a discount on your current policy. If you have a spare room, consider renting it out, or think about moving to a less expensive area.

2. Find Ways to Increase Your Income

If you're working full time, look for opportunities to make some extra cash from your current job. Options include asking for a raise or taking on overtime hours. If you believe you can find a better-paying job elsewhere, you may also want to spend some time researching job listings to see what you can find.

If you have time outside of your primary job, you may also be able to start a side hustle, find odd jobs or look for ways to make extra money from home to earn some extra cash.

3. Get on an Income-Driven Repayment Plan

If you have federal student loans, you may be eligible for one or more of the four income-driven repayment plans offered by the Department of Education.

These plans allow you to reduce your monthly payment to 10% to 20% of your discretionary income, which is based on your household income and the poverty guidelines for your state of residence and household size. They also extend your repayment term to 20 or 25 years, after which your remaining balance is forgiven.

These plans can provide both short-term and long-term relief and are particularly beneficial if you believe your financial struggles won't be temporary.

4. Consolidate Your Federal Student Loans

The federal loan consolidation program lets you replace one or more of your existing loans with a new one for the same amount. This can help because consolidation loans can extend your repayment term from the standard 10-year plan to up to 30 years.

With a longer repayment period, you'll end up paying more interest, but it can reduce your monthly payment to a more manageable level.

Just keep in mind that your interest rate will be slightly higher. Your new loan servicer will take the weighted average interest rate across all of the loans you're consolidating and round up that average to the nearest one-eighth of a percent. It's not a huge change, but it can make a difference over 30 years.

5. Ask for Deferment or Forbearance

Both federal and private student loan borrowers typically have access to deferment and forbearance programs. These options are reserved for people who are experiencing financial hardship, and they can pause your monthly payments for a time so you can get back on your feet.

Keep in mind, though, that you may only be able to skip payments for a few months, so it's not a long-term solution. Also, interest will still accrue on your loans during the forbearance or deferment period—unless you have subsidized federal loans and you're on a deferment—so you're essentially just kicking the can down the road.

6. Look Into Loan Forgiveness and Repayment Assistance Programs

Student loan forgiveness and repayment assistance programs aren't a quick fix—you typically need to meet certain requirements, which can include waiting several years. But they can provide a long-term solution to your student loan problems while you also seek short-term relief.

There are student loan forgiveness programs available for borrowers who work in public service or as teachers, and there are federal and state-based loan repayment assistance programs that can help you if you're a health professional, teacher, public defender, STEM worker or military service member, among other professions. Take some time to research opportunities online to see what's available and whether you're eligible.

Also, note that some private employers also offer student loan repayment assistance as an employee benefit. If your company doesn't offer this, consider doing a little research to see if you can find a job with an employer that does.

7. Consider Refinancing Your Student Loans

If you're struggling to keep up with federal student loan payments, your best bet is to keep your loans where they are. There are far more options available to federal student loan borrowers to reduce their monthly payments compared to private student loan borrowers. If you refinance federal loans, you'll lose access to those benefits.

But if you have private student loans, refinancing can be a good way to reduce your monthly payments. If you can qualify, you may be able to secure a lower interest rate than what you're paying right now, which can automatically cut your payment amount.

Additionally, student loan refinance companies can offer repayment terms ranging from five to 25 years, and extending your repayment term will also result in a lower monthly payment. Just remember that a longer repayment period means higher total interest charges.

Find the Path That Works Best for You

It can be difficult to know which option to pursue, and in some cases, it may make sense to take advantage of more than one of them. The important thing is that you take intentional steps right now to avoid defaulting on your student loans, which could cause even more problems.

Think carefully about your current needs and how each option can help you achieve your goals. At the same time, consider both the pros and cons of each option and how they might impact you in the long run.

If you're considering refinancing, take a look at your credit score to see if it's a good option. You can typically get approved with a FICO® Score in the mid 600s, but your best bet for a lower interest rate is in the mid to upper 700s. If your score isn't quite there yet, work to improve your credit before you apply.

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