Furthermore, it’s possible to defer student loans for up to a period of three years. Forbearance, on the other hand, is a protection only offered for up to 12 months. As of the first quarter of 2019, there are an estimated 3.4 million federal student loans in deferment and another 2.7 million in forbearance.
Private student loan repayment
It’s easier to default on private student loans than on federal loans. In some cases, a private lender will consider a borrower to be in default after a single missed payment (though they often aren’t considered to be in default until three months go by without a payment). Unlike federal loans, there’s no single threshold for being in default; the rules involved are spelled out in individual private loan agreements.
Borrowers who fall behind on their private student loan payments will see their credit scores decline. Additionally, private lenders can send outstanding loans to collections agencies once borrowers fall behind on payments. Those that have trouble collecting their debt can then sue borrowers for repayment. Once a judgment is obtained in a private lender’s favor, that lender can pursue remedies such as wage garnishment.
Many private lenders have deferment or forbearance programs, though borrowers typically need to make a compelling case to be eligible for them. Under both programs, however, interest continues to accrue on outstanding debt during the time in which payments are paused.
As of the end of the first quarter of 2019, % of private student loans are considered to be in repayment, according to MeasureOne. Of those, however, 1.5% are 90 days or more past due, which generally means they’re in default. Meanwhile, % of private student loans are in deferment, 2.18% are in forbearance, and 2.44% are in their grace period.
Income-driven repayment plan use
Those who take out federal student loans can hop over to this website apply for an income-driven repayment plan if they’re struggling to keep up with their payments. These plans cap monthly payments at a reasonable percentage of borrowers’ income — anywhere from 1020% — and forgive remaining balances after 2025 years.
Currently, there are an estimated 7.37 million federal student loan borrowers on an income-driven repayment plan. These plans come in four varieties, and here’s a breakdown of what they entail and how many borrowers are taking advantage of them:
Public Service Loan Forgiveness
Student loan borrowers employed by a government or not-for-profit organization may be eligible to have their debt forgiven under the Public Service Loan Forgiveness Program. Those seeking to have their debt erased must meet certain criteria, such as being on an income-driven repayment plan and having made 120 qualifying payments toward their outstanding debt.
As of the third quarter of 2018, 1,173,420 borrowers attempted to certify for Public Service Loan Forgiveness, according to the U.S. Government Accountability Office. Of those, 890,516 had their employment and loans certified as eligible. However, just 19,321 of them submitted forgiveness applications, and a mere 55 officially had their loans forgiven.
Student loan balances are likely to continue climbing as college costs rise or hold steady at already inflated rates. Students who borrow excessively risk falling behind on their payments (keeping in mind that not everyone takes out federal loans, and not everyone is eligible for an income-driven repayment plan). A better bet is to keep debt as low as possible. You might opt for more affordable schools over pricier ones and work while you’re earning a degree.
Those with existing student debt should take steps to stay on top of their loans to avoid defaulting, damaging their credit, and suffering other repercussions. Though private loans don’t offer the same built-in protections as federal loans, many private lenders work with borrowers and negotiate repayment terms. Refinancing is also an option for those struggling to keep up with their student loan payments, especially among those with excellent credit.
