Paying student loans can seem like watching the kitchen sink clog up—it is tempting to look away, but you might end up with a bigger issue in the end. The first step to successfully paying student loans is to stop ignoring the problem.
If you struggle with paying your student loans, you are not alone in this battle. Student debt has become a national crisis with outstanding loans totaling more than 1.5 trillion and millions of Americans struggling to manage their payments.
Not paying your loans may be tempting, but there can be significant consequences for student loan default including:
- All of the unpaid balance of your loan and any interest you owe could become due (this is called “acceleration”).
- You will no longer qualify for deferment or forbearance, and you could lose eligibility for other benefits including the ability to choose a repayment plan.
- You will not qualify for additional student loans.
- The default will be reported to credit bureaus, damaging your credit score.
- Your future tax refunds may be withheld and applied toward defaulted loans (this is called “Treasury offset”).
- Wages may be garnished. This means your employer may be required to withhold a portion of your pay to pay for defaulted loans.
If you want to avoid loan default and get back on track with paying student loans, here are some steps you can take.
Four-Step Method to Paying Student Loans
1. Organize Your Loan Debts
Now that you have decided to begin paying your student loans, you need to find out what needs to be paid. The Department of Education provides a handy online tool to help you find out what debts you owe and to whom they are owed. Visit the National Student Loan Data System to look up the details of all of your loans.
2. Educate Yourself
Learning never stops -- even if you aren’t in school currently. If you do not understand the meaning of consolidation or the difference between federal loans vs. private loans, take the time now to educate yourself on the language of loans.
3. Find Your Repayment Options
If you cannot afford the monthly payments set by your creditors, you have options. Several kinds of repayment plans are available for you, and you can learn more about them through a your own research, or you can use a tool like CESI’s student loan navigator to help -- you will receive a detailed action plan with step-by-step instructions to apply for each of the repayment options available for your specific loans.
4. Stick to Your Plan
Once you have a repayment plan for paying student loans, you’re well on your way to success. The next step is to follow your plan. A budget is a great way to stay on track -- whether you build a budgeting plan with the help of a non-profit credit counselor or build one entirely on your own, a budget will help you stick to your plan of paying student loans. Find out what motivates you and reward yourself periodically as you accomplish your monthly goals. You can even get friends and family involved to help you stay within your plan.
Paying student loans can feel difficult, but with a little bit of time and effort, you can access all the tools you need to start establishing a debt-free life.
If you are experiencing financial difficulty and are looking for a solution, non-profit credit counseling can help you make sense of all your options. Contact us today for a free financial assessment with one of our certified credit counselors.
