How do I avoid defaulting on my student loans?
October 17, 2012 4:04 PM   Subscribe

I have a little more than $30,000 in "Stafford" federally subsidized student loans which have been in forbearance and/or deferment as I have been unable to find steady work since I finished school 3.5 years ago. At this point I am flat broke, living off food stamps and credit cards, and it appears my loan servicers are no longer willing to grant me further forbearance. What are my options?

For what it's worth, I completed a Phd in a hard science but have been unable to find full-time work due largely to my inability to move from the job-poor area I live in with my kids. I have been making money under the table as a "handy-man" and various temporary gigs while applying for jobs I am absurdly over-credentialed for and then... not getting those jobs.
posted by anonymous to Work & Money (15 answers total) 12 users marked this as a favorite
Can you consolidate the loans and choose either the income-contingent or income-based repayment plan? Payments can get pretty small with those.
posted by dilettante at 4:12 PM on October 17, 2012 [4 favorites]

FWIW I had similar loan amounts, and income-based repayment still put me at ~$350-$400 a month... and was hard to afford at the time.
posted by nile_red at 4:17 PM on October 17, 2012

Yep. Income-based repayment is going to knock those loans down to very little per month. You pay for 25 years and you're done. Also, if you work in a non-profit, school or government, you pay 120 payments and you're paid off, no matter what the original amount was.
posted by cnc at 4:17 PM on October 17, 2012 [3 favorites]

Loan forgiveness isn't going to help OP right now, but might in 10 years. Stafford loans are eligible for income-based repayment linked above.
posted by Hollywood Upstairs Medical College at 4:24 PM on October 17, 2012 [1 favorite]

Ask Heather Jarvis is an excellent source of information about this stuff.

All Education Matters has much less practical advice, but it is a great resource when you're feeling overwhelmed. AEM are agitators and advocates to fix the broken student loan system and to support people suffering extraordinary hardship because of loans, particularly in an economy where there aren't jobs. There really are not many options for a lot of people, unfortunately, and AEM is among the groups trying to fix that.
posted by crush-onastick at 4:37 PM on October 17, 2012

FWIW I had similar loan amounts, and income-based repayment still put me at ~$350-$400 a month... and was hard to afford at the time.

The monthly amount in Income-based repayment has no relationship to loan amount. It's capped at 10 or 15% of monthly income, regardless of principal.
posted by The Michael The at 6:27 PM on October 17, 2012 [2 favorites]

Can you pick up some online consulting work somehow? Editing science dissertations? Editing journal articles for ESL students?
posted by barnone at 8:36 PM on October 17, 2012

I would echo income based repayment as the best option for you. I have more than 100,000 in student loans and pay about $110 a month.
posted by Happydaz at 10:17 PM on October 17, 2012 [3 favorites]

Everyone who says that you should sign up for the IBR plan is correct. You will submit documentation of your income (i.e. your completed 2011 tax return) and your payments will be reduced to an amount determined by last year's income. There's a simple calculator here.

This is not deferment or forbearance and, barring legislative changes, will be available to you as long as you submit yearly proof of income (make sure you're on top of it, though, or you can wind up having a month where you make a "full" payment before the paperwork is processed). There are other advantages, like a limitation on the amount of interest that can be recapitalized, and a three-year period in which the government will pay interest which is in excess of your IBR payment.

Additionally, you'll be eligible for the 10-year public service loan forgiveness (as mentioned above) if you make 120 payments while working for a qualifying employer. Even if you don't, any remaining balance will be forgiven after 25 years of payments.

If you have a truly low income, and the fact that you're eligible for SNAP suggests that you do, your payments may be waived completely. If I recall correctly, I made less than $18,000 in the first year after I graduated, and my payments were below $90/month on roughly $43,000 of loans.
posted by pullayup at 10:46 PM on October 17, 2012 [1 favorite]

FWIW I had similar loan amounts, and income-based repayment still put me at ~$350-$400 a month... and was hard to afford at the time.

If you really had $30,000 of loans, you were probably on the income-contingent plan. IBR payments top out at less than $300/month for that size loan--essentially, if you made enough money to have a $350-400 payment, you made too much to be eligible for the plan.
posted by pullayup at 10:53 PM on October 17, 2012

Ahhhhh yes, I was mistaken!
posted by nile_red at 4:40 AM on October 18, 2012

I have a bit more than that in federal loans. I have no dependents. Last year, because of some unusual circumstances my adjusted gross income was low and I paid $33. a month on my loans on an income-based repayment plan. Call them today!
posted by mareli at 5:53 AM on October 18, 2012

Please MeMail me, I may be able to help you at least get more work as a handy-man.
posted by MexicanYenta at 8:18 AM on October 19, 2012

As someone who has struggled with the exact same problem (minus the dependents), I highly suggest consolidation and an income-based repayment plan.
posted by SkylitDrawl at 11:19 AM on October 19, 2012

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