Help! I can’t afford my Student Loans!

Student Loans are a special kind of unsecured debt. This debt is non-dischargeable in bankruptcy, so while bankruptcy can help you free up funds for the payment of student loans by helping you to get rid of credit cards, repossessions, and old income tax obligations, in most cases it cannot get rid of your student loans. I often tell clients that it is easier to get rid of Uncle Sam (taxes) than it is to get rid of Aunt Sallie (student loans).

But, this does not mean you are stuck. There are things that you can do to help yourself with student loan payments that you cannot afford:

  1. Pick up the Phone.  Call your student loan  provider to see what programs are available to lower your payments or give you temporary relief from the payments. Just remember when you are on the phone to push to get information about all the programs available to you.  Do not just follow the instructions from the representative on the phone.  Servicers, such as Navient, are being sued by the U.S. Government for failure to provide borrowers with information and help.  In these suits, the servicers have claimed that in enrolling borrowers in the programs that were less time consuming and labor intensive for the servicers rather than the best program for the borrower that it was unreasonable for the borrower to expect the student loan servicer to act in the best interest of the borrower.  So be careful and do your homework!
  2. Get your Income Information Together.  An income based repayment plan may be a better option than temporary relief from any payment.  It easy in a fit of financial panic to take the option that frees up the most monthly income for other items needing your attention, but this decision may bite you in the butt later when payments must be made and the balance is quite a bit bigger than you remember.  You must choose which option is the best fit for you.  Which is best for you? The program that gives you the lowest payment or the program that most affordably allows you to pay off the student loan?
  3. Stick to the Plan.  If you default on a plan to repay or modified payment, work to either cure the default or research a new plan that is a better fit.  A good resolution is not a default ruining your credit report and your student loan balance getting larger.
  4. Refinance.  Refinancing part or all of your student loan may be a good solution.  There are a variety of companies that allow for the refinancing of student loans.  Refinancing may make the payment more manageable by extending the terms of repayment and lowering the interest rate.  Some companies allow you to extend the payments out to 25 years.  The downside is that the options for forbearance or deferment may not be available once the loan is refinanced.  There are a variety of websites that provide information about student loan refinance, such as Credible.com, Studentloanhero.com, and Consumeradvocate.org. Once again, make sure to do your research!

 

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