Many students utilize federal student loans to pay for their college education. There is nothing wrong with borrowing money to cover your college expenses; but you must repay your loans someday. Fortunately, nearly all lenders offer a variety of repayment options to choose from.

Repayment Plans

Your lender will work with you to help you choose an appropriate repayment plan based on your current financial situation. For instance, if you are experiencing financial problems or only working part-time, your lender may lower your monthly loan payments. However, you are still responsible for repaying all of your student loans according to the terms and conditions outlined by the lender. Keep in mind that if your loan payments are lowered, it will take you longer to repay your loan (since you are making smaller payments each month).

Postponing Payments

If you are unable to make your scheduled loan payments, you can apply for a forbearance or deferment. If your application is approved, you can temporarily postpone your loan payments (usually up to 1 year). However, if you are approved for a forbearance, interest will continue to accrue on your student loans. On the other hand, with a deferment, interest does not accrue while your payments are postponed.

There are several ways to qualify for a deferment or forbearance, and your lender will tell you which option is best for you. For instance, you can usually temporarily postpone your student loan payments for the following reasons:

Economic hardship
Unemployment
Illness
If you are enrolled in college at least half-time
If you are enrolled in a dental or medical internship, or residency program
If you are currently performing active duty military service
Teaching in a qualifying area of the country
Serving in the Peace Corps

Loan Consolidation

If you have multiple federal student loans from different lenders, consider consolidating your loans. When you consolidate your student loans, all of your loans will be combined into one new loan, and you will only have one monthly payment. Many people consolidate their student loans because it is more convenient for them and it lowers their monthly payment schedule.

Defaulted Loans

Generally speaking, if you fail to make a payment to your lender for 270 consecutive days, your federal student loan goes into default. A defaulted student loan can have a negative impact on your credit history; and it can also make it difficult for you to obtain credit in the future. And if you default on a federal student loan, you may not receive financial aid in the future until you repay that loan (or bring your account current). In addition, the lender may send your account to a collection agency, or sue you for the unpaid debt. And as a result, the government can garnish your wages and withhold your income tax refund to repay your debt.

As you can see, you have several options when it comes to repaying your federal student loans. If you are ever unable to make your monthly payments, by all means contact your lender as soon as possible for assistance. It is better to postpone your payments (or lower your monthly payments) instead of defaulting on your loans.

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