Financial hardships don’t discriminate; they can happen to anyone at any time. If you can’t make rent or pay your mortgage, you might find yourself homeless.
Being homeless can hurt you mentally, physically, and emotionally — and it also can crush you financially. Whether you work and can’t afford home payments or you’re unemployed, you still might be responsible for other bills, such as student loan payments. Understandably, that might not be your biggest worry right now.
If you’re homeless and can’t pay your student loans, here are three steps that could help you during these rough times.
1. Deferment and forbearance
When you don’t have a place to live, your focus tends to shift to finding one. Credit history, however, is a major part of qualifying for a mortgage or an apartment. If you have a history of not paying back your student loans, you could be indicating to lenders that you’re not able to make home payments.
Instead of ignoring your student loans, seek a pause in payments with deferment or forbearance. These actions allow you to stop paying your student loans temporarily due to financial hardship. Pausing your monthly payments in this way won’t impact your credit report negatively.
Under the deferment option, your federal debt repayment can be put off for up to three years and you might not have to pay interest on the loans, depending on the kind of loans you have. Forbearance pauses your repayments for up to a year, but the interest can add up. It’s understandable that accruing interest isn’t your biggest concern while you’re homeless. But when it comes time to repay your loans, your payments will be larger because of the added interest.
Both these options for federal loans are for a temporary period, so once your allotment is up for either one, you won’t be able to use it again.
Deferring private student loans is possible, but the opportunities vary by lender. Contact your servicer to see if you can set up student loan deferment due to economic hardship.
2. Income-driven repayment (IDR) plans
“Forbearance and deferment will ‘stop’ the loan payments, but I see this as a Band-Aid,” said Joshua Cohen, who runs a website called The Student Loan Lawyer. “The better option is to apply for IDR. It also looks better on credit, which may be important if the homeless person is attempting to get back on their feet and into housing.”
There are a few IDR plans available for federal student loans, and you could qualify for one depending on your financial situation. IDR plans can lower your monthly payments to as little as 10% of your discretionary income. If you don’t have any income, your payments might be as low as $0 per month.
One such option is the Income-Based Repayment (IBR) plan. It’s available if your prospective payments would be lower than your payments under the standard plan, and if you can show financial need. You can use our IBR calculator to see how much your potential payments could be.
Income-driven repayment plans are available only for federal loans. You can try to lower your private student loan payments by contacting your lender to see what it offers. Not all loan servicers provide repayment help, but it’s worth checking.
3. Forgiveness, cancellation, or discharge
There are other options when you’re homeless and struggling to pay your student loans as well. You could qualify for student loan forgiveness if you work as a teacher or are in public service. Under some circumstances, your loans could be canceled.
You also might be able to get your student loans discharged if you declare bankruptcy, but that possibility can be rare. Also, if you have a long-term or total disability, you can apply for a disability discharge.
You might be among the nearly 60% of homeless Americans who are working part time or full time, but many people are unemployed. If forgiveness or disability discharge aren’t options for you, look for local resources. There are some charitable resources, such as United Way 2-1-1 and Catholic Charities, which can help you during your time of need.
You have options if you’re homeless
Being homeless is so difficult that shouldn’t have to worry about anything else besides finding a place to live.
If you’re trying to take care of other financial obligations while struggling to find permanent housing, there are ways you can take care of your student loans so they don’t hurt you in the long run.
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