There are basically three types of loans.
The first, and most common, are loans made by banks and the federal government, known as federal loans. The second are loans made by your school. The third are private loans made by banks or other financial institutions that don't include government guarantees.
If you have federal loans, your first option is to repay the loans as agreed. This can take up to 10 years. If you cannot repay your loans that quickly, you may be able to extend your payments over a longer period of time, usually up to 25 years. You can also arrange a plan where your payments increase over time, or rise and fall with your income. Federal loans can also be consolidated. Consolidation can only be done once and the rules for consolidation vary by the dates the loans were made. Consolidation may result in a lower interest rate, lower payments and an extended payment schedule.
If you are unemployed or in poor health, you may be able to arrange to postpone all payment on your Federal loans temporarily. This is called a deferment, during which your loan balance does not increase. You may also qualify for a forbearance, during which your balance goes up because interest is added to your loan, but your payments are completely suspended. In rare instances, student loans are canceled.
The options we've discussed do not apply to loans made by schools or private lenders. If you have this type of loan, you must contact your lender to request payment arrangements. These arrangements will probably not be as lenient as those offered by the federal government.
If you are having trouble repaying your student loans, one of many student loan repayment options may be right for you. It is important to determine the type of loans you have. Federal loans offer the most options. School and private loans must be negotiated with the lender. Whatever you choose to do, keep in contact with your lender to avoid costly damage to your credit rating.
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