Millions of Americans struggle to make monthly student loan payments.
As of the Department of Education’s June 2025 update, more than one in three federal student loan borrowers are at least 30 days late on their payments. Additionally, 42% of borrowers say their loans are negatively impacting their ability to cover basic needs, a recent study by the Institute for College Access and Success found.
If you’re facing hardship, “it may be tempting to stop paying your federal student loans, but that may not be a wise choice in the long run,” says Glenn Sanger-Hodgson, a student loan advisor at Student Loan Planner.
Avoiding loans altogether may seem like your only option, especially if you’re juggling monthly payments with necessities like rent and groceries. But if you miss payments on your loan for long enough to fall behind (usually 270 days after you missed your first payment), you could end up in a much worse situation.
“The federal government has extraordinary collection powers, including the power to garnish wages and garnish federal tax refunds, including refundable credits such as the Earned Income Tax Credit, without a court order,” Sanger-Hodgson said.
Here’s what you can do instead:
Relief options available to federal debtors
If you know you’re going to have trouble paying your student loans, “the first thing you should do is contact your servicer,” Sanger-Hodgson says.
Sanger-Hodgson says your loan servicer can help you identify an income-driven repayment plan that may reduce your monthly payments or defer or forbear your payments “until you figure out how to start making payments on your loan again.” If your loan is approved for forbearance or deferral, you don’t have to make any payments, but the way interest accrues varies by program.
Subsidized loans do not accrue interest, with deferrals available for borrowers undergoing cancer treatment, those facing financial hardship such as unemployment, and other circumstances.
Loan servicers may grant forbearance to borrowers who demonstrate financial hardship, such as high medical bills or high monthly payments, but the borrower remains responsible for the interest accrued on all loans.
Both deferrals and deferrals have different eligibility requirements and require servicer approval according to Federal Student Aid Guidelines. Borrowers may be granted forbearances of up to 12 months at a time and up to three years cumulatively. Deferment deadlines vary.
Obtaining approval under one of these relief options “could be a good solution to avoid short-term payments and free up cash for higher priority obligations,” Sanger Hodgson said.
Balancing different financial priorities
Sanger-Hodgson says that once you apply for a deferment or forbearance, “focus on paying off debts related to essential items, such as mortgages and car loans, especially if those loans are secured by assets that could be taken away.” Safely suspending student loan payments “could be a useful tool while borrowers strive to become financially stable,” he added.
Borrowers with no other debt may consider reducing their retirement savings options if they are strapped for cash. But saving for the future and paying off a loan aren’t necessarily “at odds”, says Sanger-Hodgson.
That’s because when you’re on an income-driven repayment plan, contributions to pre-tax accounts like 401(k)s and individual retirement accounts reduce your taxable income, which in turn reduces your student loan payments, creating a “positive feedback loop,” he says.
Additionally, some employers are now offering student loan payment benefits to make it easier for workers to achieve both goals at the same time.
Still, “in some cases, it may be a good idea to pause or reduce your retirement savings,” says Sanger-Hodgson. “For example, if you have high-interest private student loans, it may be better to tackle that as soon as possible.”
According to Bankrate, interest rates on private student loans range from 2.79% to 17.99% and are generally higher than interest rates on federal loans. Additionally, private loans do not offer the same protections as federal loans, such as income-based repayment plans, deferrals, forbearance, and forgiveness opportunities.
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