Money for Any Reason You May Need!

What to do if You Can’t Pay Student Loans

The tough economy is taking its toll on the ever-growing number of college grads who are dealing with the repayment of their student loans. About 7% of all student loans default, which are about 231,000 borrowers who end up not being able to repay their student loans. Defaulting is about the worst thing you can do for your credit score, and can result in horrible scenarios from garnished wages to getting sued to repay the entire amount of the loan. The good news is that graduates who are dealing with economic troubles and are having difficulty repaying their loans do have some options. Here are a few things you can do if you simply don't have the money to repay your student loans.

Notify The Lender

If you are facing trouble with the repayment of your loan then it is absolutely essential that you discuss it with your lender. You won't be able to simply walk away from your financial woes due to the fact that it will negatively affect your credit score and your life. Those who try to turn their back on their creditors will end up in delinquency and then default. This usually happens only after two or three missed payments. However, those who are honest with their lenders that they are having difficulties will be given various options to repay such as deferment options or allowing you to alter your payment plan.

Demand a Payment Plan

One way to lower your student loan payments without harming your credit score is to alter your payment plan. A typical student loan repayment plan lasts for ten years, however that doesn't necessarily mean you have to make equal payments each month for the entire time. In fact, the federal government allows you to take on four different kinds of repayment plans including paying the same amount each month or making it income-contingent.

Look Into Postponing Your Payments

If you are unable to make student loan payments then you still have several options that are available to you as long a your lender is notified before your student loan defaults. If you are in the federal loan program and can prove that you're in financial hardship then you'll be entitled to having your student loans deferred as long as you meet all of the requirements for eligibility. Those who defer their student loans will typically be able to do so for up to a year. The most common reasons for deferring is the inability to find employment or dealing with economic hardship.

Look Into Loan Forgiveness

If you have exhausted the option to defer your loan or created a repayment plan then you can try to look into having your loan cancelled or taking a forgiveness option if you qualify. If you're in a service position like a nurse, teacher or in the military then you may be able to get your loans canceled from a state or federal-sponsored program. Depending on the state that you reside in you may be able to get your loan entirely removed, however if you live in California, Kentucky or Iowa you will likely have a tougher time as these states have been tightening their restrictions on qualifying. If you aren't in a service field then you can look into having as much as 70% of your loan canceled by serving in Americorps, Peace Corps or Teach For America. If you go this route then you wont need to make any payments before you receive your loan forgiveness.

Get Your Way Out of Default

If you are a federal loan borrower who has already ended up in default then you can try to get your way out of it by calling your lender and asking about any rehabilitation programs that they have. There are several programs that may allow you to climb your way out of default through making several loan payments on time. Those organizations that aren't offering rehabilitation at the moment such as American Student Assistance can still help you by aiding you in customizing a payment plan. Keep in mind that lenders want to do everything in their power in order to aid you in repaying your loan, as no one is a winner if you get stuck in default.