Dear Penny: I Owe Five Times My Student Loan After Forbearance. What Can I Do?

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Dear Penny,

I apparently got a student loan from the federal government, and apparently back in 2012 they put it in forbearance. I was out of work at the time I graduated, and they never contacted me again until I started working for the federal government over 10 years later. The debt is now five times what the original loan was.

What do I do? They want thousands for a payment a month, and they claim I should have been aware of the account all these years and that it’s not their fault the account sat in forbearance. They even admit it sat there, and no one noticed the lack of payments or contacted me all these years. What do I do; I am so upset right now.

— Surprised by Debt

Dear Surprised,

This is an incredibly frustrating situation, and you’re not alone. Federal student loans are serviced by private companies that are regularly restructuring, merging or disappearing, and they’ve historically mismanaged these loans, to the detriment of millions of borrowers like you.

It’s also not unusual that you weren’t even aware you carried this debt. Many students at around age 18 are ushered through the process of applying for loans as part of the college application process, and no one explains the massive debt burden you’re committing to. I was in a similar situation after college, with loans in forbearance for years.

Thankfully, federal student loan debt comes with a lot of relief options you can take advantage of.

First, you might be able to get your loans out of forbearance with just a few dollars a month, depending on your financial situation. Contact your student loan servicer to negotiate a plan. You don’t have to commit to the monthly payment they ask for; tell them what you can afford to pay each month, even if it’s just $5, and they could set you up with a plan to do that. Find your loan servicer’s information on any of the correspondence you’ve received, or check (under Loan Repayment).

Getting the loans out of forbearance is an important step if you’re concerned about the debt’s negative impact on your credit score, and it’ll help you benefit from federal loan relief options.

Then you can apply for income-driven repayment, which sets your monthly payment in line with your discretionary income. This could make your payment as little as $0, or at least more fitting for your financial circumstances.

Because you work in the public sector, also talk to your loan servicer about Public Service Loan Forgiveness. Under this program, you make payments for 10 years under an income-driven repayment plan, and you can apply for forgiveness of any remaining balance after that time. On-time payments count toward this program, even if you owe $0 per month; but payments toward your loans while they’re in forbearance don’t count. Stay in touch with your servicer to make sure your payments are being applied and you’re making progress toward forgiveness.

Dana Miranda is a Certified Educator in Personal Finance®, author, speaker and personal finance journalist. She writes Healthy Rich, a newsletter about how capitalism impacts the ways we think, teach and talk about money.