Student Loan Payments When Poor

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Every Friday I take a reader’s question and spend some time answering it.  Our question today was submitted via my reader survey.  If you want to ask a question contact me.

How does one pay back student loans when they can barely make rent and buy groceries?

The reason most financial folks call student loans “good” is because of their flexibility.  And in this case, that is a good thing for you.

Sometimes you just need a little breathing room to get your finances under control.   In this post I introduce you to student loan repayment options.

Short Term Solution: Student Loan Deferment or Forbearance

Deferring Student Loans

Deferring your student loans means that you will have a period of time where your payments are not required.  Such deferments are typically offered if you are returning to an eligible school, facing economic hardship, or you are currently unemployed.

Based on your question, it seems as though you would qualify for a student loan deferment (due to economic hardship).

In addition to meeting the necessary requirements your loan must be active (not in default).

If you are eligible you should contact the holder of your loan and request the necessary paperwork to file for a student loan deferment.

Student Loan Forbearance

When one is offered a student loan forbearance they are given a set period of time where they have permission to stop making payments.  A forbearance can be for up to one year at a time.  To qualify, you typically need to prove your poor health, have extenuating personal problems, your inability to pay within the maximum repayment term, or your monthly payments equal more than 20% of your monthly income.

Note: Interest will continue to accumulate during the forbearance.

If you are eligible, you should contact the holder of your loan and request the necessary paperwork to file for a student loan forbearance.

I’d try and get a student loan deferment as it seems like you are an eligible candidate.  The process is really quite simple and I know of many people who have received a deferment without much effort.  In fact, when my wife and I went to grad school we had my wife’s student loans deferred.  If you are not eligible and your monthly student loan payments exceed 20% of your income, then get the forms for a student loan forbearance.

Is a student loan deferment biblical?

When you make a loan of any kind to your neighbor, do not go into his house to get what he is offering as a pledge. Stay outside and let the man to whom you are making the loan bring the pledge out to you. If the man is poor, do not go to sleep with his pledge in your possession. Return his cloak to him by sunset so that he may sleep in it. Then he will thank you, and it will be regarded as a righteous act in the sight of the Lord your God. (Deuteronomy 24:10-13 NIV)

The Bible has always promoted fairness in lending and does allow for economic hardship deferral.

Remember, the intention is not to escape your obligation to repay.  It is simply to make time for you to get your financial act together.

Long Term Solution

Increase Income

From your short question, I’d say the missing link is your income – it simply is not enough.

Start by seeking out a good paying part time job.  Here is a list of 50 part time jobs to consider.  In addition, this might be a perfect time to make a few extra dollars as a 2010 census taker or work doing some mystery shopping.

From there I would map out a long term game plan on how you will use your education, gifts, and passion to find a more profitable full time job.

Reduce Spending

Be sure that you are keeping a written budget every month.  Learn how to make a budget.  Also, cut costs by being resourceful.  Make frugal your new favorite word.

I hope this information helps and I hope that you can find a way to get free from this financial burden.  Let me know if there is anything else you need.

Disclaimer: None of this information should be considered legal or professional advice.  You should additionally seek out the advice of a financial professional.  Your exact situation depends on facts unknown to me.

Anyone else have any advice?  How would you advise/encourage this reader?

Comments

  1. Emily Mahoney says

    This post caught my eye because I work for Sallie Mae, actually selling private student loans. While I do not work in collections, I can tell you that we work with parents and students in every way to help them pay back loans. Your suggestions are excellent, however, I would advise getting in touch with one collector and keeping their phone extension. When only one person is working on your case, it become a lot less frustrating to work with the company. You can also consolidate debts, to make sure that you’re paying the lowest interest rate possible. For private loans, the interest rate can go up to 12.5%, plus LIBOR, which is adjustable. If you have one of these loans and can’t make the payments, consolidation may be the best option. I hope this helps a little!

  2. Craig says

    @Emily.
    Thanks for chiming in. Glad that someone one ‘in the industry’ was able to comment.
    Great tip on talking only with one collector. These types of discussion can get so complicated so at least working with one person makes the process much smoother.

  3. D Saltares says

    co-sign parent loan-got sick, unemployed, am now disable-do i still own the balance of this loan. will get goverment benefits. had consolidated loan but have still made payment -i am current with payment (my daughter has been doing the payments) do i still own this loan , since i am disable? thank-you for your any information on this situation. d.s

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