Student Loan Help: Free and Low-Cost Solutions to Out-of-Control Loans

Learn about repayment plans, deferment, forbearance, refinancing, and more

If you're falling behind on your student loans, you need to get help fast. Miss enough payments and you could face serious consequences, including damage to your credit score, having your wages garnished, getting sued, or having your tax refund seized. Fortunately, both federal and private loan servicers have ways to help borrowers get back on track. Nonprofit organizations can assist, too. And if those options don’t work, hiring a knowledgeable attorney could be money well spent.

Key Takeaways

  • If you're struggling to pay back your student loan debt, you can apply for an income-driven repayment plan for long-term relief.
  • You can also seek deferment or forbearance for a short-term break.
  • If you've defaulted on your student loans, you can rehabilitate or consolidate them.
  • You may be able to refinance any private student loans you have.
  • You can also get advice from a nonprofit credit counseling agency.

Income-Driven Repayment

If you can’t afford your current monthly student loan payments, but a lower payment might be doable, you have several options.

If you have federal student loans, consider applying for an income-driven repayment (IDR) plan. That can be a good choice if your current income is low relative to your student loan debt. Your payment under an IDR plan could be as low as $0. Each year, you will need to recertify your income with the federal government, and your monthly payment will be adjusted based on your income and family size.

There are four different IDR plans; the ones available to you will depend on the type of federal student loans you have.

When you choose an IDR plan, you will probably pay more interest in the long run, as you’ll owe money for a longer period and be paying down the principal more slowly than if you were on a standard 10-year repayment plan.

IDR plans forgive your remaining balance after 20 or 25 years of payments, but you may owe federal income tax on the forgiven sum. It's a good idea to set aside a little money each year so you’ll be able to pay that bill one day.

Income-driven repayment plans are free to apply for (although some private companies will try to get you to pay a fee). You can complete the paperwork yourself in about 10 minutes.

Income-driven repayment won’t solve everyone’s student loan problems. Some borrowers find that they have so many mandatory expenses, such as taxes and child care, they still can’t afford the payments.

And if your loans are in default, then you aren't eligible for IDR (or for deferment or forbearance, for that matter). You’ll first need to fix the default through loan rehabilitation or consolidation, as explained below.

Deferment and Forbearance

Deferment and forbearance are two ways to temporarily stop making payments or lower your payments on federal student loans. Some private lenders offer one or both, with different rules.

Borrowers with subsidized federal loans or federal Perkins loans don’t have to pay the interest that accrues during deferment.

Forbearance, on the other hand, does not stop interest from accruing on any type of federal student loan. Private lenders decide how to handle interest accrual under deferment or forbearance.

In November 2022, the Department of Education extended the pause on federal student loan payments in response to a federal court order blocking the White House's student loan forgiveness plan. Student loan payments will resume 60 days after the department is permitted to implement the program or the litigation is resolved. However, if the program has not been implemented and the litigation remains unresolved by June 30, 2023, payments will resume 60 days after that.

Your lender or loan servicer will require you to meet certain conditions before it approves your request for deferment or forbearance. Federal student loan borrowers, for example, may be able to take a break from making payments if they are unemployed, experiencing economic hardship, undergoing or recovering from cancer treatment, or serving on active military duty.

Delinquency and Default

Either deferment or forbearance may be better than letting your loans become delinquent. Once your payment is 90 days late, your loan servicer will report your delinquent payments to the three major credit bureaus, which can hurt your credit score. That will make it harder to get other forms of credit or do anything else that requires a credit check, such as renting an apartment or getting a job.

Going into default is even worse. The timing varies by loan type, but for federal direct loans and Federal Family Education Loans, the debt is in default if it is 270 days late. For private student loans, default usually happens as soon as you miss a single payment.

The consequences of default will be defined in your loan agreement. Your entire balance can become due immediately, your lender can sue you, and your wages can be garnished, among other consequences.

If Student Loans Are Part of a Bigger Financial Problem

A nonprofit credit counseling organization can work with you to come up with a personalized plan to repay your student loans and any other debts. You may have to pay a fee for this help.

A reputable place to search for help is the National Foundation for Credit Counseling. A credit counselor can offer guidance on your entire financial picture, not just getting your student loans under control.

When Your Federal Student Loans Are in Default

If your federal student loans are in default, you can enter the federal student loan rehabilitation program or you could try loan consolidation.

Loan Rehabilitation

The federal student loan rehabilitation program requires you to make nine payments within 10 consecutive months. You’ll need to work with your loan servicer to determine your required payment, which will be based on your disposable income.

You’ll also need to provide proof of your income and possibly proof of your expenses. The Federal Student Aid website says your payments could be as low as $5 per month under a rehabilitation plan.

Once your loan is rehabilitated, you can apply for deferment, forbearance, or income-driven repayment. Your credit report will no longer show a default, though it will still show the late payments that led to your default.

You only get one chance to rehabilitate a loan. In addition, your loan will continue to accrue interest during rehabilitation, and you may have to pay collection fees as well.

Loan Consolidation

Loan consolidation is another option for getting out of default. You may be able to use a federal direct consolidation loan to pay off your defaulted loan. You can then set up an income-driven repayment plan for your new consolidation loan if you need to.

You’ll need to make three consecutive monthly payments on your defaulted loan before you can consolidate it. Your loan servicer will base the amount of the payments on your current financial circumstances, so they may be less than you were required to pay in the past.

Consolidation will get you out of default sooner but it won’t remove the default from your credit report. It also comes with possible collection fees and additional accrued interest.

When Your Private Student Loans Are in Default

There’s no simple path for getting out of default when it comes to private student loans. You’ll have to work out something with your lender or hire an attorney. Negotiating a settlement for less than you owe may be an option. To find an attorney, try the American Bar Association's website, the National Association of Consumer Advocates, or

If you can’t afford to have an attorney represent you, consider paying for an hour or two of advice so you can learn what you need to do to represent yourself. You can expect to pay a few hundred dollars for this service versus several thousand to have an attorney represent you.

And be careful to avoid student loan scams when you're looking for help.

Student Loan Refinancing

If you have multiple federal student loans, you can apply for a consolidation loan, as noted above. The interest rate will be based on your loans' original interest rates.

Unfortunately, you can't consolidate your loans into a new loan with a lower interest rate, even if rates are lower now. To get that lower rate, you'd need to refinance your federal student loans into a private student loan. You can also refinance private student loans into a new private student loan.

It can make sense to refinance if doing so will significantly lower your interest rate and make your monthly payment more affordable. It can also help you repay your loan faster and pay less interest over the life of the loan.

However, if you refinance a federal loan into a private loan, you will lose the unique options available with federal loans: income-driven repayment, loan forgiveness, loan rehabilitation, and possibly deferment and forbearance. So think carefully before giving up these benefits.

Refinancing might also mean paying an origination fee, which will vary depending on the lender. Many private student lenders don’t charge them, but if they do, the fee will usually be added to your loan balance or subtracted from your loan proceeds.

Private student refinance loans can have fixed or variable interest rates. If you’re struggling with your current payments, it may be tempting to refinance into a variable-rate loan because it will probably have a lower interest rate than a fixed-rate one. Before you do, find out how often the loan’s rate can increase and by how much. Also, find out what the floor and ceiling are on the variable interest rate. You'll need to consider whether you would be able to afford the payments if the rate goes up.

You’ll have to have good credit to refinance at a favorable interest rate. If you’ve already fallen far behind and your credit score has plunged, refinancing might not be an option for you.

You also need to have a steady income to refinance, so if you’re unemployed, you’ll have to look at other options.

How Can I Get Help With Student Loan Debt?

Some ways to get help with student loan debt include lowering your payments through an income-driven payment plan, paying less temporarily via a deferment or forbearance agreement, and looking into debt cancellation or forgiveness programs.

In any case, talking to a credit counselor at a nonprofit service is a good way to start.

How Do I Get Help With Student Loan Forgiveness?

Student loan forgiveness is only available to individuals with federal student loans, not private loans. Applying to the different programs that offer student loan forgiveness and meeting the criteria for qualification can lead to student loan forgiveness.

There are a variety of programs available, including income-driven forgiveness, public service loan forgiveness, teacher loan forgiveness, military student-loan forgiveness, and state-sponsored repayment programs.

How Might Canceling Student Loan Debt Help America?

Proponents of canceling student loan debt argue that it would help America in many ways, including encouraging people to seek higher levels of education, increasing savings rates, improving the quality of food consumption, increasing birth levels, boosting home purchases, and encouraging business creation.

The Bottom Line

Ignoring financial problems never makes them go away, and often makes them worse. If you default on your federal student loans, the government has the power to seize your income tax refund and garnish your wages and even Social Security benefits.

Falling too far behind on any type of student loan, federal or private, can also seriously hurt your credit. It can also cause your lender to take the seemingly nonsensical and drastic step of accelerating your loan, making the entire balance due immediately.

You can prevent the situation from getting worse and put your loans back on track with one of the options described above. If your situation truly seems hopeless, trying to get your student loans discharged in bankruptcy might be your best option. That's possible, but it's not easy.

Investopedia does not provide tax, investment, or financial services and advice. Readers should consult with a qualified financial professional to determine suitable options and their ramifications given their specific circumstances.

Article Sources
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  1. Federal Student Aid. "Income-Driven Repayment Plans."

  2. Federal Student Aid. "Student Loan Deferment."

  3. U.S. Department of Education. "Biden-Harris Administration Continues Fight for Student Debt Relief for Millions of Borrowers, Extends Student Loan Repayment Pause."

  4. Federal Student Aid. "Student Loan Delinquency and Default."

  5. Federal Student Aid. "Getting Out of Default."

  6. Federal Student Aid. "Student Loan Consolidation."

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