11 Steps to Relief From Federal Student Loans

Students and parents can negotiate lower debts, smaller payments, or temporary reprieves

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[Read tips about how to take advantage of IBR.]

 If you believe you can't afford to make any payments for a while, check out the deferment and forbearance options. Both programs allow borrowers to skip payments for up to three years. But borrowers should generally try for deferment first, since lenders must grant deferments to all qualified borrowers. And subsidized Stafford or Perkins loans suspend charging additional interest during deferments, so those debts don't keep growing. (The other kinds of loans do keep growing, however.) Lenders can choose whether or not to award forbearances, on the other hand, so those negotiations can be more difficult. Borrowers with incomes below 150 percent of poverty who want to skip payments can also consider signing up for IBR, since they won't be required to make monthly payments.

 If you think you can't, or shouldn't have to ever pay off a federal education loan, you can try for a complete discharge. But those are generally limited to people who've become permanently disabled, or were victims of loan or educational fraud.

 6. Determine what's causing your financial problems. Figuring out the reasons your money runs out before the end of the month can help identify the best solution. If you're having trouble because you are working in a low-paid public service job, consider consolidating your loan directly with the federal government, signing up for IBR, and hoping for some debt forgiveness in 10 years.

 If you are having trouble because you have returned to school at least half time, are ill, are caring for an ill spouse, are a new parent, are serving in the military, or have joined the Peace Corps, there's hopeful news. You can automatically qualify for a deferment of your payments, which means you won't have to make any payments until you leave school or the military.

 If you are having trouble because you've lost a job or suffered a drop in income, see if you qualify for an "economic hardship" deferment. The government permits borrowers in severe financial difficulties to skip payments for up to three years. If you don't qualify for a deferment, you may be able to persuade your lender to grant you forbearance.

7. Take responsibility. Be realistic about your obligations and the rules. If you stopped paying because you moved and didn't receive a bill, don't expect much help. Borrowers are responsible for notifying lenders of moves and making payments. If the lender made a mistake on a bill, by, for example, failing to credit payments, you'll have to provide proof of your payments. If your debt seems much more than you borrowed, remember that most loans—subsidized Stafford and Perkins loans are typically the exceptions—keep accruing interest while you are in school or while your loan is in deferment. All types of federal loans accrue interest in forbearance. It is almost impossible to escape paying student loans, even if you file for bankruptcy, so it's in your best interest to try to reach a resolution as soon as possible.

8. Learn your rights. Unfortunately, some collection agency employees are poorly trained, or may have financial incentives to pressure you into paying faster or paying more than you can afford. The National Consumer Law Center's Student Loan Borrower Assistance site has advice. You can also read the federal government's manual for student loan debt collectors to find out what collectors are allowed to do.

9. Propose a reasonable solution. Generally, delinquent borrowers can switch to more affordable payment plans or win deferments without having to make any payments first. The government can also award retroactive forbearances or deferments to wipe away current delinquencies, though collectors may ask for evidence of a good reason, such as unemployment. The federal government allows its collectors to waive collection costs and knock as much as 10 percent off of the total debt for those who prove that's all they can afford and who make good faith efforts at repayment. Such discounts are left to the discretion of the servicer or collector, however.

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