Much has been reported about the struggles of furloughed federal workers during what has become the longest government shutdown in U.S. history. As each day passes without a resolution to the crisis, a growing portion of the 800,000 affected employees face the bleak prospect of falling behind on their financial commitments.
If you are among those who have been asked to wait out the shutdown on the sidelines or continue reporting to work without pay, you are all too aware of the mounting financial pressures. Mortgage lenders, credit card companies, utility service providers and others have come forward with temporary hardship programs specifically for furloughed workers, but what are the options for student loan borrowers?
There is no one-size-fits-all solution, but the Student Loan Ranger can suggest a few steps for borrowers to take to get through the government shutdown:
— Communicate proactively.
— Review your federal student loan repayment options.
— Consider other repayment options.
Step 1: Communicate Proactively
As a furloughed federal employee, your current financial circumstances are the result of events largely beyond your control. You know all of the intimate details of your situation, but your student loan servicer may not.
[Read: When to Contact Your Student Loan Servicer.]
That information gap could be keeping you from an array of repayment relief options. The first step you should take is to reach out to your servicer and have a conversation about your financial hardship, and what you expect to happen unless you can make temporary arrangements for repayment relief.
If you aren’t sure about who is servicing your student loans, there are some easy steps you can take to find out. Federal borrowers can visit the National Student Loan Data System website and select “Financial Aid Review” in the left menu. After accepting the terms, you can enter your FSA ID and access a list of your outstanding loans. Clicking on the number associated with each will give you access to lender contact information.
Private student loan information can be found by accessing your credit report if you don’t have a recent statement from the lenders.
Step 2: Review Your Federal Student Loan Repayment Options
Temporary relief for federal student loan borrowers may come in the form of a deferment or forbearance. There are several different types of each, which makes it even more important to work with your servicer to identify the right one.
Either option can offer a much-needed reprieve from the full amount of recurring student loan payments during your furlough, but it’s important to understand that you could be facing an increase in your loan balance resulting from continued interest accrual during that time. However, those with subsidized loans don’t have to be concerned about accruing interest.
[Read: What to Know About Federal Student Loan Repayment Options.]
If you are on track for Public Service Loan Forgiveness, there are special considerations you should make before moving forward with either option. Guidance on the Department of Education website tells borrowers that “periods of deferment or forbearance will not count toward the 120 payments needed” to qualify for loan forgiveness under the program.
This does not mean that you will be disqualified, but it does extend the amount of time it will take you to complete the required repayment schedule. For this reason, it is recommended that you also explore the benefits of an income-driven repayment plan, as it may be a more suitable solution.
An income-driven repayment plan is designed to set monthly payments according to changes in your income. These options include Pay As You Earn, Revised Pay As You Earn and Income-Contingent Repayment. The greatest advantage of each is that your monthly payments can be as low as $0 based on your household income. If you are seeking Public Service Loan Forgiveness, even a substantially reduced payment can keep you on track.
If you are already enrolled in an income-driven repayment plan, don’t assume that your payment will automatically adjust according to your present situation. You have to request a recalculation before any adjustment can be implemented.
Still, it is good to know there are provisions in situations where your level of income has changed since your last federal income tax statement.
Step 3: Consider Other Repayment Options
Available hardship repayment plans for private student loans may vary between lenders, so it is worth contacting each to discover what is being offered for furloughed federal workers, and to find out which is best suited for your needs.
Even if there is no solution through your servicer or lender, you might not be completely out of choices. Some banks and credit unions are offering interest-free emergency loans to help fill the income gap caused by the government shutdown.
[Read: Know When It’s OK to Postpone Your Student Loan Payment.]
Normally the Student Loan Ranger does not recommend borrowing money to replace lost income, but when the loan terms are interest-free, and repayment does not have to begin until the income stream resumes, it is an option that is worth considering.
Keep in mind that the financial impact of the shutdown will not end immediately for all of the affected federal workers as soon as paychecks resume. Keeping the lines of communication open with servicers and lenders can help make the road to recovery easier in the months ahead.
And when you return to work, you should inform your servicer of the change in your employment status and that you will be able to repay your loan based on your regular income.
More from U.S. News
How to Find How Much You Owe in Student Loans
How I Repay My Student Loans: Real Borrowers Share Stories
Why Repaying Federal Student Loans on a Credit Card Is a Bad Idea
How to Manage Student Loan Debt During Government Shutdown originally appeared on usnews.com
