What will you do once you get out of student loan collections and default? Well, it’s recommended to draft a plan which will help you prevent the same scenario again. Fortunately, you will find some things you can do to avoid student loan collections and defaults even if your finances get tight again.

  1. Take into consideration forbearance or deferment

If you can’t avail any payment, you could opt for forbearance or deferment. These two options are available to federal student loan borrowers that enable you to stop payments for a limited time.

However, deferment is more beneficial. Throughout a deferment, the subsidized loans’ interest won’t accumulate — that aids to keep the total loan balance less. You can also defer your loans when you’re enrolled at least halftime in the military, unemployed, or college.

Meanwhile, in forbearance, the interest on every loan still accrues while the payments are paused. Illness, financial hardships, or other reasons might make you qualified for forbearance.

Generally, you have the freedom to apply deferment or forbearance of your loan payments for at least twelve months at a time.

  1. Pick the ideal repayment plan

Did you know that the federal government provides various repayment plans for federal student loans? Yes, and you can’t replace the repayment plan of the defaulted loans. However, you could switch plans after the loans are out of default. Shifting to another repayment plan will help the payments be more controllable and make it simpler to prevent defaulting once again.

The federal government provides six different repayment plans. They are the following:

  • Revised Pay As You Earn – This program utilizes ten percent of your discretionary income to determine your monthly payment. This counts your wage and your spouse’s wage even if you file individually.
  • Pay As You Earn – This program only utilizes ten percent of your discretionary income to determine the monthly payment. Normally, borrowers end up paying less with this program. However, the only drawback here is that it’s hard to qualify for. The payments here could run as low as $0 every month.
  • Income-Based Repayment – Your monthly payment is according to your family size and income. Your remaining loan balance isn’t considered. As an alternative, borrowers only pay 15 percent of their discretionary income to their federal student loans. For others, this denotes paying as less as $0 every month.