If you find yourself in a situation where you cannot make payments on your loans, you will want to contact your loan servicer and make alternative arrangements, such as switching to a different payment plan.
You also can request a deferment. This is a period of time where you are not required to make payments on your loan(s). During this time, the federal government will pay the interest on your subsidized loan(s).
You still will be responsible for any interest that accrues from unsubsidized and PLUS loans. There are deferment requirements you will need to meet. Contact your loan servicer for additional details or to arrange a deferment.
Another option is asking for a forbearance. A loan forbearance is a period of time where your loan(s) are temporarily delayed or reduced. The difference between a forbearance and deferment is that during a loan forbearance, you will be responsible for all the interest that accrues on your loans. There are eligibility requirements for forbearance to be eligible. Contact your loan servicers if you need to arrange a loan forbearance.
If a payment becomes nine months late, you will default on your federal loan. There are severe penalties for going into default, including collection costs, wage garnishment, social security garnishment forfeiting of income tax refund and serious harm to your credit.
If you have defaulted on a federal loan, there is a way to solve the problem. It can take up to nine months to fully rehabilitate your loan and get back on track.
If you are in default on Federal Direct Loans, you can contact the Department of Education’s Debt Management and Collection Service office, and they will assist you in finding out which collection agency is in charge of your loans.