If you have a federal student loan and have been consistently struggling to make payments, there's one important deadline you have to remember: Borrowers typically enter default after 270 days of missed payments.
Once your loans are in default, you can have your wages garnished and tax refunds withheld. Although the Trump administration has put a pin in doing this until new repayment plans are finalized, collections will one day resume, leaving borrowers with little time to prepare.
If you're worried about defaulting, here's how you can avoid it.
Know where you stand
While checking your student loan balance and facing late notices can be nerve-wracking, avoidance will only make things worse. Log into your student loan account at studentaid.gov to see where you stand, figure out how far behind you are on your payments and how much time you have left before you hit that 270-day default deadline. You can set up alerts, too, so you never miss a payment again.
Use budgeting tools to cover your minimum payment
Once you know how much you owe and what your minimum payment is, aim to cover just that so you keep your payments current. Use budgeting apps like YNAB (You Need A Budget) or Empower to track your transactions and divvy up your cash. Knowing where your money goes will help you make sure you can carve out space for your minimum student loan payment.
You Need a Budget (YNAB)
Cost
$14.99 per month or $109 per year ($9.08 per month). Users get 34-day free trial (College students get 12 months free)
Standout features
Employs a zero-based budgeting system, with users assigning every dollar a "job" (bills, savings, investments)
Categorizes your expenses
No
Links to accounts
Yes, bank and credit cards
Availability
Offered in both the App Store (for iOS) and on Google Play (for Android)
Security features
Encrypted data, accredited data centers, third-party audits and more
Terms apply.
Pros
- Offers a 34-day free trial (college students get 12 months free)
- Designed to help users pay off debts and break paycheck-to-paycheck cycle
- Syncs to bank accounts and credit cards
Cons
- One of the more expensive options, with no free version
- Set-up can be laborious
- No bill tracking or bill pay feature,
Empower
Cost
App is free, but users have option to add investment management services for a fee
Standout features
A budgeting app and investment tool that tracks both your spending and your wealth
Categorizes your expenses
Yes, but users can modify
Links to accounts
Yes, bank and credit cards, as well as IRAs, 401(k)s, mortgages and loans
Availability
Offered in both the App Store (for iOS) and on Google Play (for Android)
Security features
Data encryption, fraud protection and strong user authentication
Terms apply.
Pros
- Free to use
- Includes money-tracking dashboard, plus a net-worth tracker
- Syncs to your bank and credit cards as well as other financial accounts
- The Currency blog offers financial planning tips
- Security features include data encryption, fraud protection and strong user authentication
Cons
- Budgeting features aren't as comprehensive as other apps
- Investment management services come with cost
Maintaining a budget can also help you figure out if you can even afford the minimum monthly payment. It's better to confirm your budgetary capabilities than to keep taking shots in the dark. If you find that you're already at the top of your budget and can't afford the minimum payment, there are still other options you can consider.
Ask for a repayment plan that works for you
Before you miss too many more payments, reach out to your servicer to see if they can point you to a a repayment plan that works best for your circumstances. For instance, if your income is unpredictable or you're unemployed, an income-driven repayment plan may help you land lower monthly payments. As the name suggests, this type of repayment plan is based on both your monthly income and on your family size. If you have less income, ideally your loan payment should be lower.
You can request consideration for this payment plan on the studentaid.gov website.
You can also request forbearance or deferment on your loans. Both options grant you a temporary pause on payments without penalty. With forbearance, interest will still accrue on your loans, whereas, with deferment, you won't continue accruing interest during this period.
Automate your monthly payment
Student loan servicers let you sign up for autopay to make sure you never miss a payment. If you have the space for it in your budget, autopay can be well worth it to avoid delinquency and default. Plus, servicers typically offer a small interest rate discount (usually of around 0.25%), which can help lower your monthly payment.
Don't ignore delinquency
Delinquency comes before default. It's when you've missed one or more student loan payments. If your loan is already delinquent, it can be a warning sign that you may be hurtling toward default. Even if your account is delinquent, you can still request changes to your repayment plan that can help you avoid default.
You can respond to delinquency notices immediately by asking for a repayment plan switch, a new payment due date that works better with your paycheck schedule, forbearance or deferment, plus any other options they may be able to offer right now. You can simply tell the servicer, "I want to avoid default. What are my options?"
If you're on track for default, making even one payment on-time and in-full can reset that default clock.
Correction: Federal student loan borrowers typically enter default after 270 days of missed payments, but it depends on the type of loan. An earlier version of this article mischaracterized the timing of when a borrower enters default.
Curious about refinancing?
Offers in this section are from affiliate partners and selected based on a combination of engagement, product relevance, compensation, and consistent availability.
Undergraduate and graduate students, parents, students in MBA, law, health professional and dental programs
$5,000 (or state-mandated minimum) up to the cost of attendance
5, 7, 10, 15, years; up to 20 years for refinancing loans
Terms apply.
Undergraduate and graduate students, parents
Amount varies by individual lender
Range from 5 to 20 years
Terms apply
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FAQs
Do student loans affect your credit score?
Student loans can impact your credit score because they are a form of installment credit and payment activity gets reported to the three major credit bureaus. Consistent, on-time payments can increase your credit score, while late or missed payments can lower it.
What's delinquency?
Delinquency is when you've missed a payment on your student loan. Once your payment is 90 days late, your servicer reports the missed payments to the credit bureaus and it can start impacting your credit score.
What are the consequences of default?
Default occurs when your student loan payment is 270+ days late. If you default on your loan, the entire balance can be due immediately and your servicer can garnish your wages, take your tax refund and take your Social Security check to cover the loan.
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