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What To Do If Your Salary Won’t Cover Your Student Loan Payments

When you graduate from college you expect to find a job that will pay enough to allow you to take care of those student loan debts. For many, however, that dream fails to turn into reality.

Millions of people graduate each year, diploma in hand and stars in their eyes, only to find that their best employment option is in a field that doesn’t require a degree at all. Faced with a paycheck that barely covers gas for the car, the student loan bills quickly fall behind.

It’s no wonder – after all, most student loans companies don’t broadcast their payment options. That leaves borrowers and their families in the dark, feeling as if there are no options.

Here, then, are the first steps to take when you realize your salary won’t cover the student loan payments.

Get into an income-dependent repayment plan. Federal student loans give you the option of tailoring your payments to a portion of your disposable income. Income-based repayment and Pay As You Earn are very popular, and can even result in payments as low as $0 per month.

Look to the public sector. Jobs with the government or 501(c)(3) not-for-profit companies may not pay well, but if you snag one of these jobs you may be able to wipe out your federal student loans after making 120 timely payments through Public Service Loan Forgiveness. Combine this with one of those income-dependent repayment plans and you have a powerful student loan weapon.

Look at your benefits package. Some employers will actually pay all or part of your student loan debt after a period of time. This is more likely to be the case if you go to graduate school while working for a large employer, but companies like Starbucks have been rolling out programs like this for a greater number of their work force.

Recognize the risks of nonpayment. With the payment options available for federal student loans there’s a good chance you can afford to make the payments, but private student loans don’t come with such protections. For federal student loans, nonpayment can result in administrative wage garnishment and tax return offsets, among other things. Private student loans, if not paid, will likely result in a lawsuit against you.

Free up some cash. Look around you and see if there’s anything you can live without – if so, hit Craig’s List or hold a yard sale to collect some money to throw at the private student loan balance. If you’ve also got significant credit card debt, consider bankruptcy as a way to wipe the slate clean and free up more money to pay down the student loans. Desperate times call for desperate measures.

Act strategically. If you’re not able to pay the private student loans, you need to have a plan to put away a small amount of money each month to fund a settlement or legal defense. Your chances of settling the debt improve as the delinquency gets longer, but unless you’ve got money to hand over the lender isn’t going to approve a settlement at all. It helps to talk with a lawyer who focuses his or her practice on student loan resolution because this way you’ll get the facts about your situation.

Remain calm. Student loans can be impossible to manage, and your options aren’t always as good as you might hope. But a little knowledge goes a long way, and you can get on top of things if you approach the problem head-on.

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By |November 4th, 2014|

About the Author:

I’ve been a consumer protection lawyer since 1995, working to help people end their bill problems. I’m a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.

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