Loans Student Loans Managing Your Student Loans Student Loan Payment Options By Miriam Caldwell Miriam Caldwell Miriam Caldwell has been writing about budgeting and personal finance basics since 2005. She teaches writing as an online instructor with Brigham Young University-Idaho, and is also a teacher for public school students in Cary, North Carolina. learn about our editorial policies Updated on May 20, 2022 Reviewed by Samantha Silberstein Fact checked by Emily Ernsberger Photo: damircudic / Getty Images If you are having a difficult time repaying your student loans, you may have a few options available to you. Before you consider them, you need to make sure that you are truly having a difficult time paying. If you have a cell phone or cable or eat out every week, then you need to change your lifestyle until you pay off your loan. If you have lost your job, have a low-paying job, or are having a difficult time finding a job, you may consider one of these options to manage your student loan payments. You may want to try steps to pay off your student loans sooner, since holding onto your student loans may be hurting your finances. Student Loan Consolidation You may want to consider student loan consolidation, since this process can lower your monthly payments and lock in a low interest rate. It is important to realize that consolidation can extend the life of your loan and greatly increase the amount of interest you pay. If you do consolidate, you may consider paying the loans back at a quicker rate once you are in a better financial situation. You may need to consolidate to a Federal Direct Loan if you want to qualify for income-based payment options or loan forgiveness in the future. Student loan consolidation may also be available for private student loans. Be sure that you never consolidate your federal student loans into a private student loan, because you will lose many of the benefits that come with federal student loans like income-based payments and hardship deferment. Note If you consolidate your private student loans, be sure to research the lender and try to lock in a lower fixed interest rate. Consolidation is similar to refinancing, but there are differences. Generally, your loan refinancing options will depend on your credit score, while your loan consolidation options will not. Refinancing issues a separate, new private loan through a financial institution like a bank. Consolidation averages out all outstanding loans into a single remaining loan. Unemployed Deferment You are allowed to have three years of unemployed deferment on your federal student loans. You can take advantage of this deferment if you do not have a job. Since you are only allowed three years, you should carefully consider your options before claiming deferment. During deferment, the federal government will pay the interest on the subsidized Stafford Loans. You will be responsible for the interest payments on the unsubsidized Stafford loans. Deferment is not a permanent solution and it will not reduce the amount you end up paying back. However, it is a good option if you are in a financial situation where money is tight and you know things will improve shortly, like finding a job after you are laid off. In order to qualify for deferment, you need to be current on your loan. Contact your lender as soon as you think you may need to defer the loan. Do not wait until you have missed a payment. Economic Hardship Deferment If you have a low paying job you may qualify for economic hardship deferment. This is usually for a specified amount of time. Your lender will let you know how long you have. If you do qualify, take the opportunity to really focus on changing your financial situation. You may take the money you were paying for your student loan and apply it to credit card debt. If things are really tight you may be barely scraping by. Be careful not to add more debt to the picture. Note If you qualify for economic hardship deferment, you will need to reapply for it each year. Be sure to note when that application is due, and ensure that deferment has continued. You are responsible for payments if you do not qualify even if you do not receive notice that you did not qualify. Forbearance Forbearance is your final option when it comes to paying back your student loans. If you are having difficulty making your payments, then you need to contact your lender. They are usually willing to allow you to make a lower payment rather than put the loan into default. That should be your last option, however. It is important to be open with your lender, because they do want you to repay the money. By communicating with them when you have a problem, you can generally avoid being put into default on the loan. If you have a private student loan, it is unlikely that forbearance is an option. It is important to pay off your private student loans as quickly as possible, because they have higher interest rates and are not as flexible with dealing with you if you have difficulty making payments. Income-Based Payments If you have a low income or a large family, you may qualify for income-based payments. Note You will need to be signed up for a Federal Direct loan in order to qualify for an income-driven repayment plan. The student loan will be based on a percentage of your income. You can have the balance of the loan forgiven after 20 or 25 years, depending on when you got the loan. This is a good option to consider if you are struggling to make ends meet. You will need to submit proof of income each year to stay enrolled in the program. You may also qualify for the Pay as You Earn (PAYE) or Revised Pay As You Earn (REPAYE) plans, which operate in the same way. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Federal Student Aid. "Student Loan Deferment Allows You to Temporarily Stop Making Payments." Federal Student Aid. "Choose the Federal Student Loan Repayment Plan That’s Best for You."