Many students have found themselves in a situation where their student loans are just too overwhelming. Defaulting on a loan is a prime way to ruin your credit, so what do you do? If you have every intention of paying back your loans, but just are not in the financial position to do so, there are options for you. However, please be advised that even if you are financially struggling, the loans you took out are still your responsibility.
First and foremost, you should be advised that having your loans discharged or cancelled as a result of bankruptcy is near impossible. To do so, you would have to prove undue hardship on yourself and/or your family. An undue hardship would be the result of some type of physical or mental disability that is preventing you from working and earning money. If this is the case, then you would have to go to bankruptcy court and present your situation in front of a judge. As this is a very rare occurrence, you should try other options to help repay your student loans.
One thing to keep in mind is that you are entitled to a six month grace period. If you have not already used your grace period, you will have six months after you graduate until loan payments will come due. This may help you by biding you some time. If you continue to have a hard time, or you already used your grace period, you can ask your lender for forbearance. Forbearance is “a period of time during which monthly payments you would normally be required to make are temporarily suspended or even reduced” (Lechter and Totman, pg. 145). Being offered forbearance is completely up to the lender.
Another option to pursue is consolidating your loans. When consolidating your loans, you wrap all of your outstanding loans into one loan. Consolidation can possibly reduce monthly payments or provide more favorable repayment options. In addition, having a single loan instead of multiple loans can have a positive psychological effect on the loan borrower.
As you can see, there are options out there for students struggling to pay back their debt. Defaulting is never an option, so make sure to contact your loan servicer. They are willing to work with loan borrowers to find a repayment plan that is beneficial to all parties involved. If you feel that you are going to have problems paying back your school loans, do not wait until it is too late. Explore your options as soon as possible to ensure that you do not default on your loans.
Lechter, Sharon and Angela Totman. Your Financial Mastery: Financial Literacy for the Real World. TechPress, Inc, 2013. Pgs. 144-45. Print.
By Ryan Laspina
Compliance and Default Prevent Specialist at American Public University System