Pay off Student Loans

Pay Off Student Loans. What are your options if you really can’t pay? Expert advice on repaying student loans, your options if you cannot pay and default student loans.

Tax Deductions

Good news for those still owing on student loans after 2002: you can deduct interest payments on your student loans, up to $4000 of student loan interest. For smaller loans, this may mean a total waiver of interest payments.


Use this option if you are out of work or going back for graduate school. Deferment allows you to put off your loan payments for a certain period of time, so long as your reason for deferral meets the lender’s requirements. While subsidized loans will not be charged interest during this deferral period, unsubsidized loans will continue to accrue interest.

More reasons for deferment include: if you become unemployed, if you go back to school, if you are on Supplemental Security Income, if you are suffering economic hardship.

However, note that if you have defaulted on your student loan already, you will not be able to apply for a deferment.


This option allows you to either postpone your loan payments or reduce the monthly payment amount according to your ability to repay. Usual reasons for putting loans into forbearance include medical emergencies, or loan payments that form an almost crippling proportion of one’s monthly income.

Forbearance is much easier to secure than deferment, as there are far less restrictions. The major downside is that interest will always continue to accrue.

Extended repayment

This option allows you to negotiate your loan repayment over a longer period. However, this usually means a higher interest rate, and a much higher total interest payment.

Default Student Loans

Defaulted student loans: If you do not make monthly payments for at least six months, you will be considered to be in default. That means that the lender will begin to take legal action against you for your student loan default. Your credit rating may be affected for up to seven years, tax refunds may be used to pay off your student loan, and up to 10 percent of your wages may be garnished.

In order to get out of default, you need to make twelve consecutive monthly payments on your student loan. As you then pay off student loans of yours, your default will also be removed from your credit report.

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