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Strategies to Avoid Defaulting on Your Student Loan

Sometimes life throws curveballs that wreak havoc with our finances. When that happens, it’s tempting to ignore statements—or set your email to send payment reminders right to the spam folder. 

But really, the easiest way to avoid defaulting on student loans is to face the problem head-on. 

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According to Money, in 2016, about 27.3% of graduates who were supposed to be paying back their loans had fallen into delinquency—that’s one in four borrowers, and not a club you want to join.

So how can you avoid default? It might not be as hard as you think.

Drastic changes that don’t feel drastic

If you’re struggling to keep up with student loan payments, you’ve probably strategized about different ways you can make more money or cut expenses. The problem is, those solutions often don’t go far enough. 

Your best bet is to look for solutions that will help you handle your debt in a more manageable way. There are four options worth exploring:

  1. Refinancing
  2. Consolidation
  3. Income-driven repayment, and
  4. Forbearance 

Let’s talk about each one.

Refinancing

Refinancing your student loan debt can save you money in both the long run and the short run. That makes it one of the most effective ways to avoid defaulting on your student loans. 

When you refinance, you often qualify for a lower interest rate. That means you’ll pay less for the life of your loan and you’ll also get a more affordable monthly payment. In fact, many people are able to lower monthly payments by over $200 a month.

Consolidation

Consolidation is a way to join multiple monthly loan payments into one. This can result in a lower monthly payment because consolidation often extends the life of your debt—so you’ll pay less each month, but you’ll be paying for a longer period of time. 

Consolidating most often refers to federal loans, which can be consolidated though federal Direct Consolidation Loans. While you can “consolidate” private loans, you’re actually just refinancing several loans into one, at a lower interest rate.

When considering refinancing or consolidating federal loans, be aware that you could lose certain benefits, like loan forgiveness. Carefully weigh whether the lower payments are worth the tradeoff. (If they keep you out of default, they might be.

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Income-based repayment plans

If your income doesn’t quite cover all your expenses, or you have barely anything left over after you’ve paid your bills, you can apply to have your monthly student loan payment reduced through an income-driven repayment plan. 

Keep in mind that these plans apply to federal loans only.

Forbearance

Finally, requesting a forbearance can allow you to temporarily stop making payments without taking a hit on your credit score. However, forbearance is not guaranteed for most private loans. You’ll need to check with your lender to see if you qualify.

In any case, forbearance should be a last resort. Why is that? Because interest will continue to accrue on your loan during your forbearance. That means that when you’re ready to resume payments, you’ll have a larger debt to tackle and, very likely, larger monthly payments.

Whatever you do, don’t wait until you’ve missed one or more payments to contact your lender. Addressing the problem quickly can help head off financial disaster later on. 

Is refinancing your student loan debt the right move for you? Check out our free Student Loan Refinancing Calculator to see how much you could save. 

Additional Nitro Recommended Student Loan Lenders

Lender Rates (APR) Loan Types Terms Eligible Degrees Eligible Loans  

Sallie Mae

3.37% - 13.72%1 Variable & Fixed
10 - 15 years

Undergrad Students Learn More

View Disclosure

Ascent

3.04% - 14.75%1 Variable & Fixed
5 - 15 years

4

Undergrad & Graduate Students Learn More

View Disclosure

Earnest

2.70% - 12.78%1 Variable & Fixed
5 - 15 years

3

Undergrad & Graduate Student & Parent Learn More

View Disclosure

SoFi

2.99% - 13.60%1 Variable & Fixed
5 - 15 years

Undergrad & Graduate Student & Parent Learn More

View Disclosure

FundingU

6.99% - 12.99%1 Variable & Fixed
10 years

Undergraduate No-Cosigner Student Loan Learn More

View Disclosure

MPowerFinancing

7.52% - 14.98%1 Fixed
10 year only

Undergrad & Graduate Student Learn More

View Disclosure

Rates (APR) 3.37% - 13.72%1
Loan Types Variable & Fixed
Terms 10 - 15 years

Eligible Degrees Undergrad
Eligible Degrees Students
Rates (APR) 3.04% - 14.75%1
Loan Types Variable & Fixed
Terms 5 - 15 years

4

Eligible Degrees Undergrad & Graduate
Eligible Degrees Students
Rates (APR) 2.70% - 12.78%1
Loan Types Variable & Fixed
Terms 5 - 15 years

3

Eligible Degrees Undergrad & Graduate
Eligible Degrees Student & Parent
Rates (APR) 2.99% - 13.60%1
Loan Types Variable & Fixed
Terms 5 - 15 years

Eligible Degrees Undergrad & Graduate
Eligible Degrees Student & Parent
Rates (APR) 6.99% - 12.99%1
Loan Types Variable & Fixed
Terms 10 years

Eligible Degrees Undergraduate
Eligible Degrees No-Cosigner Student Loan
Rates (APR) 7.52% - 14.98%1
Loan Types Fixed
Terms 10 year only

Eligible Degrees Undergrad & Graduate
Eligible Degrees Student

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