Can't Pay Your Student Loans? Here Are Your Options

You’re not alone if you can’t pay student loans because you’re struggling with money. It’s frustrating because, if you’re like most people, the whole reason you took out student loans was so you didn’t have to worry about money.

If you find yourself in these shoes, take heart: Chances are you have many more options than with other types of debt. These solutions can help you deal with temporary financial setbacks or even create permanent changes to make your student loans easier to bear.

We’ll go over your options if you can’t pay student loans. We’ll show you who’s eligible and how it works, so you can lift yourself up and move on.

In this guide:

Options to consider if you can’t pay your student loans
What happens if you don’t pay your student loans?
Tips to avoid the consequences of not paying your student loans

Options to consider if you can’t pay your student loans

The options available to get help with your student loan repayment depend mostly on one factor: whether your student loans are federal or private.

Most student loans are federal, meaning you get them from the U.S. Department of Education and follow strict rules that often work in your favor. Federal student loans offer more options to get help if you can’t pay your student loans postgraduation.

Private student loans are much less common, making up about 7% of all student loans. You get them through private for-profit companies, each of which writes its own contract. As such, your assistance options depend on your lender, most of whom aren’t as supportive as the federal government.

How do you know whether you have federal or private loans?

You’ll need to be clear which type of student loans you have before you can figure out your options. A good place to start is by signing into your account on the Department of Education website to find your student loan servicer. This will show you all your federal student loans.

If you have private student loans and are unsure of your lender—or you want to double-check that you don’t have any private student loans—you can also get a copy of your annual credit report. Any loans you have—including private and federal student loans—will be listed here.

We’ve summarized your options for support in the following table, depending on whether your student loans are private or federal. We’ll cover each one more thoroughly below.

Click the option in the table to get more details about how it might benefit you.

Assistance option	For federal loans?	For private loans?
Income-driven repayment	✔	❌
Extend your repayment terms	✔	Sometimes
Student loan consolidation	✔	❌
Student loan refinancing	✔	✔
Deferment	✔	Sometimes
Forbearance	✔	Sometimes
Forgiveness	✔	❌
Debt settlement	✔	Sometimes
Discharge	✔	Sometimes

Income-driven repayment

Who’s eligible?

Income-driven repayment (IDR) plans are an option for federal student loans only. A range of plan options are available, each of which comes with unique rules and restrictions to benefit different borrowers depending on the types of loans you have.

What to know

When you choose one of these plans, your monthly payment is capped based on a percentage of your discretionary income. You won’t pay more than you can afford due to this cap on your payment.

Your loans will be forgiven after a set period under each plan. Unlike Public Service Loan Forgiveness (PSLF), you’ll need to pay taxes on the forgiven amount as if you’d earned it as income in the year it’s forgiven. It’s important to save for this tax bill in advance.

These plan options include:

Pay As You Earn (PAYE): Your monthly payments are scaled to 10% of your income if you have newer Direct loans, with the remaining balance forgiven after 20 years.
Income-Based Repayment (IBR): One of the only options for borrowers with FFEL loans, this plan offers monthly payments of 10% to 15% of your income, with forgiveness after 20 to 25 years.
Income-Contingent Repayment (ICR): A more expensive and lengthy plan requiring you to pay 20% of your income over 25 years, this may be the only option for parents who took out PLUS loans for their kids’ education.
Saving on a Valuable Education (SAVE): Previously known as the Revised Pay As You Earn (REPAYE) plan, this plan offers the most affordable payments (between 5% and 10% of your income), easier income qualification, and forgiveness in as little as 10 years.

Additional resources

Guide to Income-Driven Repayment Plans

Extend your repayment terms

Who’s eligible?

Federal student loans come with two options for extended repayment plans. Whether private student loans are eligible for repayment term extensions depends on your lender. Most don’t offer this option, but it may be available in some cases.

What to know

Extending your repayment term or choosing graduated repayment can help you reduce the monthly payment cost of federal student loans.

If you opt for graduated repayment, your payments start low and increase every two years. You’ll have the same 10-year term length, but payments are more affordable at the start. If you’ve consolidated your loans, you may be able to stretch that out to 30 years.

Extending your repayment term can also lower monthly payments by giving you more time to pay back what you owe. However, stretching out your term length means paying interest for a longer time, which increases your loan costs in the long run and leaves you less money to save.

If you have private student loans, you can ask your loan servicer about options for extending your repayment plan. You could also refinance into a new loan with a longer repayment timeline. We’ll explain that below.

Consolidate your student loans

Who’s eligible?

“Consolidation” is a specific term used for federal student loans only. This is opposed to “refinancing,” which you can also do with private student loans. (More on that below).

What to know

Many people left college with several federal student loan types, such as Direct loans and FFEL loans. Repaying these independently and remembering all the rules and due dates can be complicated, so you can combine them all into one Direct Consolidation loan.

In addition to qualifying for more options for income-driven repayment plans and loan forgiveness, it streamlines your repayment.

You may also be able to stretch your loan term length up to 30 years, which can help lower your payments as we described in the previous section.

Additional resources

Guide to Direct Consolidation Loans

Refinance your student loans

Who’s eligible?

Anyone with student loans is eligible to refinance them, federal or private. However, we recommend you weigh the pros and cons of refinancing federal student loans because you’ll lose access to the abundant options for financial assistance. Private lenders are much less generous in this regard.

What to know

Refinancing your student loans can help make them more affordable in three possible ways: by getting a lower interest rate, by stretching out your term length, and by getting access to new financial assistance options with a different lender.

A lower interest rate means your monthly payments may be smaller while saving you money on financing costs over the long run—a win-win scenario. A longer term length, as we described above, lets you shrink each payment if you agree to pay your loan for longer.

However, this may not be an option if you’re struggling to make payments because you might not have the required income and credit score to qualify for a refinance loan. Most lenders require a good income and a strong credit score—or a cosigner who meets these qualifications.

Depending on market conditions, it can also be tough to find a lender offering lower rates than you’re already paying. Lenders don’t always advertise their financial support options upfront, so it can be tough to find a lender offering better repayment assistance.

Additional resources

>> Read more: How to restructure your student loan

Defer your student loans

Who’s eligible?

Federal student loans offer several types of deferment. Private student loans may offer deferment, but the term doesn’t mean the same as for federal student loans. It’s typically only available if you’re still in school.

What to know

Deferment allows you to pause your payments until your financial situation improves. All federal student loans allow loan deferment under certain circumstances, such as if you’re getting cancer treatment, you lost your job, or you experience other short-term financial setbacks.

If you qualify for federal student loan deferment, the government will pay interest on your Direct Subsidized loans while you’re in deferment—but you’ll continue accruing interest on all Unsubsidized loans.

Deferment isn’t a viable long-term way to lower your payments because you may lose credit toward loan forgiveness. Any loans you have that accrue interest while in deferment will also increase the amount you have to repay, making it more difficult in the long run.

Not all private lenders provide student loan deferment, so you would need to check with your lender to see whether this is an option. Either way, you will not get subsidized interest on private loans while in deferment. Interest continues to accrue, making a private student loan “deferment” more akin to forbearance.

Most experts recommend making interest-only payments while in deferment, if possible. Some private student loan lenders require interest-only payments during deferment.

Additional resources

Student loan forbearance

Who’s eligible?

Federal student loans also offer loan forbearance, which can differ from deferment in how it treats interest. Most private student loan lenders also offer forbearance, but they generally use the term interchangeably with “deferment.”

What to know

Forbearance also allows you to pause your student loan payments. It may be easier to qualify for forbearance than deferment with federal student loans because it’s available in more scenarios, such as if you’re serving in the National Guard or Americorps, or completing medical training.

The downside is that you don’t get the free pass on interest accruing on any Subsidized federal student loans as you do with a deferment. That makes it an all-around more expensive option. You may also lose credit toward certain loan forgiveness options.

Many private student loan lenders also offer forbearance, but it may be more limited in duration to three-month chunks at a time, with a lifetime total of 12 months of forbearance available. Some private student loan lenders also charge a fee for this option.

Additional resources

Guide to student loan forbearance

Student loan forgiveness

Who’s eligible?

Student loan forgiveness is generally only possible with federal student loans.

What to know:

It’s not a short-term solution per se, but most federal student loans are eligible for loan forgiveness if you meet the requirements of certain loan forgiveness programs, which can take many years.

PSLF is one of the most popular options, for example, and it will discharge eligible federal student loans if you work for a public employer such as a school or government agency for 10 years. This option has many individual forms and certification requirements.

Teacher student loan forgiveness is another popular option for educators. Income-driven repayment plans also offer loan forgiveness, but the forgiven amount of these loans is considered taxable income.

Additional resources

Guide to student loan forgiveness programs

Debt settlement

Who’s eligible?

You may be able to negotiate a debt settlement with private and federal student loans.

What to know

If you’re already in student loan default, you may be able to negotiate a debt settlement with your private student loan lender or even the federal government. But you typically aren’t eligible for a debt settlement until you’ve defaulted on your loans, which can cause significant damage to your credit.

You’re considered in default after nine months of missed payments with federal student loans. The timeline for private student loan default varies but is often much shorter, around four months.

Debt settlement involves negotiating with your lender to pay back a smaller amount than you owe in exchange for being released from the debt. This can save you significant money and release you from your liability (albeit with scarred credit).

However, because it requires a large lump-sum payment, it’s not an option for most people unless they get a windfall or have significant backup savings to rely on. You may also need to pay taxes on the amount your lender forgives.

Additional resource

How student loan debt settlement works

Loan discharge

Who’s eligible?

Federal student loans may be discharged in certain circumstances. Some—but not all—private student loan lenders will also discharge your loan under limited circumstances, but it’s less common.

In rare cases, you may be able to discharge federal or private student loans in bankruptcy.

What to know

You (or your family) may be able to get your federal student loans discharged in certain cases, such as if you pass away or become permanently disabled. A few other rare exceptions may also apply.

Private lenders, on the other hand, are not obligated to offer private student loan discharge under any circumstances. Some lenders do, but many don’t, which can be especially dangerous if you have a cosigner on your loan.

If you pass away, for example, your cosigner can be saddled with the debt. If you don’t have a cosigner and your lender doesn’t discharge your loans, the lender can require your estate or your heirs to repay the debt.

It may be possible to discharge your student loans if you file for bankruptcy. However, the legal bar for student loan bankruptcy discharge is higher than for other types of debt, requiring you to prove an exceptional case of undue hardship beyond the reach of most borrowers.

What happens if you don’t pay your student loans?

Can you be arrested for not paying your student loans? Not exactly. But if you don’t pay your student loans, you may face late or missed payment penalties, delinquency, and even default.

Your loan will become delinquent as soon as you miss a payment, with student loan default happening after you miss nine payments (for federal student loans) or around four payments (for most private student loans).

Your loan will remain in default until you make up for the missed payments, enter a lender-sponsored financial assistance plan, or your lender sues you.

Here’s how it works:

You miss one month’s payment: Your lender reports to the three credit reporting agencies that you’re late. This can reduce your credit score by several points.
You miss two months of payments: Your lender reports your delinquency to the credit bureaus, again causing your credit score to drop.
You miss four months of payments: Your lender continues to report your delinquency to the credit bureaus. At this point, you may also face an official default on your private student loans, and you may be transferred to a collections agency.
You miss nine months of payments: Federal student loans become delinquent at this point, and private student loans are well underway in the collections process. If your lender can’t collect on your loan, you may be sued and have your wages and other income garnished.

Missing student loan payments can make it difficult to get other credit—for example, auto loans and mortgages—in the future. Lenders will view you as a high-risk borrower, and they will charge you more for new accounts or decline your application altogether.

Additional resources

Tips to avoid the consequences of not paying your student loans

In addition to exploring all the resources and repayment options we mentioned above, consider the following if you can’t pay your student loans.

Be proactive: Don’t wait until you’re already behind on payments to reach out to your lender, especially for private student loans. It’s uncomfortable, but remember: It’s in your lender’s best interest to work with you. Collection efforts are costly.
Make a budget: A budget will help you ensure you can afford student loan payments, save for the future, and lower your stress. Thanks to technology, today’s options for budgeting can suit anybody.
Get outside help: Seek assistance from a fee-only financial professional for unbiased feedback on your best options for dealing with your loans. If you can’t afford one, the National Foundation for Credit Counseling offers affordable one-on-one counseling.
Increase your income: Starting up a side hustle, taking a part-time job, and asking for a raise or more hours at work can help you afford your payments. Consider these ways to earn income.
Increase your credit score: Check your credit score and credit report to find ways you can improve your profile. This can help keep your borrowing options open, especially if you’re looking to refinance your loans.
Read your student loan agreement: Think of your promissory note as your guide and list of options available if you need help. Know where to find it and what’s in it.