There’s currently more than $1 trillion in outstanding student loans debt and more than 7 million borrowers are in default on their student loan payments. There are dire consequences to defaulting on a student loan, especially a Federal student loan.

First, your tax refund may be withheld and used for repayment for the debt. Any plans you had for that refund are gone out the window. Worse, you can have your wages garnished without a court order, meaning you won’t have a chance to go to court and defend yourself against the debt. If you already have another wage garnishment, your employer may be legally allowed to terminate you. Finally, defaulting on your student loan leads to a damaged credit score which, in turn, makes it hard to get approved for credit-based applications, like loans, credit cards, even apartment rentals.

Student loan debt generally can’t be discharged in bankruptcy, so staying current on your payments is important. The only way out of your student loan debt is to pay it off.

You may not realize it, but your lender may be able to offer a repayment plan that better suits your financial situation. Specifically, the income-based repayment plan for Federal student loans.

As the name indicates, the income-based repayment plan allows a monthly payment based on a percentage of your income. So, if you have a low income, your monthly payment under the income-based repayment plan may be lower than what you’re currently paying. Another feature of the income-based repayment plan is that the unpaid balance is forgiven after a certain number of years, e.g. 20 or 25 depending on your loan.

The income-based repayment plan has some slight modifications under the Obama administration, but the payment plan has been around for years. Still, not very many borrowers have taken advantage of the plan. Only 30% of borrowers that are in repayment status are enrolled in the income-based repayment plan, according to Business Week, possibly because borrowers aren’t aware this particular repayment plan even exists. If you’re interested, contact your student loan servicer to find out what you need to do to apply for the income-based repayment plan.

If it turns out that your payment under the income-based repayment plan isn’t lower than what you’re paying now, ask your loan servicer about other repayment options. Many lenders offer a graduated repayment plan that allows for lower payments the first few years of loan repayment and then higher payments later. It will give you some relief in the years after you first graduate, then once you're more stable, your payments will increase. Or, consider the extended repayment plan, which lengthens your repayment period to make your monthly payments lower. You'll end up paying over a longer period of time, for example 20 years versus 10, but your payments will be more affordable.

Don’t be afraid to ask your lender for help. You may be surprised to learn about the options that available for you.

Sources: BusinessWeek.com, ConsumerFinance.gov