Advice for when you are not able to pay your student loan payments

The shock of student loan repayment is one that is being felt around the country as countless graduates can’t find work, but are still stuck with a student loan bill. The inability to repay student loans is common; you are not alone. Here are some action steps you can take right now to deal with the harsh realities of not being able to pay. These are hard times that you can make better and learn from, so you can avoid other common financial pitfalls in the future. 


Do set-up a budget

You can’t improve what isn’t measured. Taking an inventory of all your money coming in and all your money going out should always be the first step in any process to solve a money issue. Setting up a budget will allow you to clearly see how much money you have, how much money you can expect to get in the future (income), and—most importantly—where your money is going.

You will find that cutting down some unneeded expenses will help. Taking lunch to work instead of always eating out, forgoing that daily $4 latte, etc., can make a dramatic difference. 

Do collect all your statements

In the spirit of taking inventory of your financial life, you should collect any and all documents you have that are related to your student loans. This can be old statements, college financial aid statements, and promissory notes. This will help you tally up the total amount of debt you have, understand your repayment terms, length of repayment and the total amount of debt payments you have each month. You need to know all of this information in order to effectively handle the repayment of your student loans.

Do tell the government you can’t pay

If you have government loans, you want to tell the government that you can’t repay your loans. In addition to a slower repayment plan, if your income is low enough, the government will suspend your payments all together, until your income rises to a level considered reasonable.

To explore your options, search online for a website that allows you to organize your loan(s), payment(s), and budget for the future. You’ll want to have both your budget and pile of loans document handy when you log-in to change your repayment plan. Websites like these will help you organize your loans, give you a clear picture of your total debt and total payments, and explain your different options. 

Do pay your private loans first

Unfortunately, unlike the government, private institutions aren’t as sympathetic when it comes to your inability to repay. For this reason, if you have the choice between repaying government, or private loans, you should always opt to pay your private loans first. The payments are more likely higher, the fees for non-repayment will be more severe, and your interest rate will only go up. Every private loan holder is different, but most do provide a line for you to call into if you think you can’t repay. Don’t expect it to be as easy as it is with Uncle Sam though. 

Do talk to a professional for a better understanding

Depending on how much you owe in student loan debt and what your income looks like, these situations can be a bit complex. If you are unsure of where to go from here, consider talking to a consumer law attorney or another financial expert who can help you get organized and on the right track.


Do not run from the problem

Of all the various types of debt out there, student loans can be the harshest. If you can’t repay the car, they take it. If you can’t repay the house, they take it. If you can’t repay your student loans, your wages are taken! Student loan debt is the only type of debt where the lender is allowed to “garnish” or, legally take, a portion of your wages in order to fulfill your debt obligations.

If you feel the need to run, run to someone who can help. But you must first take responsibility for the debt you’re in, then communicate and work with those who can help you. Doing so will make family, friends, your lender(s), and any other financial experts actually want to help you however they can. Facing your debt head-on will help you grow up, become independent, and get you on the path toward a debt-free life. 

Do not file for bankruptcy

Bankruptcy will make a bad situation worse. It will destroy your credit so badly you won’t be able to get a loan for at least 7 years and your student loan obligations won’t go away. Student loan debt cannot be eliminated by declaring bankruptcy. Many individuals see bankruptcy as this giant reset button that will magically absolve them from all of their money issues so they can start fresh. While it has the potential to alleviate some debt problems, student loan debt is not one of them. 

Do not consolidate your loans and only pay the minimum

A popular way to handle debt these days is “consolidation” or “refinance.” This is where you can go to a company that will refinance and consolidate all your loans into “one low easy payment.” We’ve all seen these ads on T.V. featuring happy customers who can now live freely because all of their debt is in one place, they make one payment, and the payment each month is lower.

The catch is it can take up to twice as long to repay the debt if you only pay the minimum, and you can wind up paying almost twice as much in interest in the long run. The fees for this process can be high, and it only results in kicking the can down the road. You may feel some relief now, but you’ll pay so much more in the long run. On the other hand, if there is no other way to afford your payments, consolidate and increase your monthly payments as your income increases.

Do not take on more debt

When it comes to expenses like food, rent, and utilities, it can sometimes be hard to pay them in addition to student loans. When faced with how to pay all of your expenses, taking on more debt should never be an option. Racking up credit card debt because your whole paycheck is going to student loans isn’t a sustainable solution. Nine times out of ten, the interest you pay on the credit card will actually be more than the interest you're paying on your loans. Don’t swap 10% debt for 25%.

Do not complain about being in debt

As much as it may be a pain in your life, it’s not something that you want to constantly complain and mope around about. This action is more about keeping you mentally healthy and upstanding in the face of the problem, rather than something that will deal with the problem directly. But it’s just as important as these other actionable steps. What you focus on tends to become bigger and bigger. It may be a painful, but you don’t want it to become a focal point in your life. Focusing on the issue can cloud your judgment and steer your attention away from the opportunities that are in front of you.

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Not being able to repay your student loans may be a big event in your life, but it doesn’t define your life. Following these steps will help you take inventory of the magnitude of the problem, so you can deal with it objectively. Being able to see exactly what your options are, and how much you have to repay, will give you a greater sense of control. Remember that thousands of other college graduates are facing this very same issue. So, ask for help if you want, but take responsibility at the same time. The fact that you took the time to read this article shows you are already on the right path.

More expert advice about Education Loans

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Jason WhalingFinancial Educator

Jason Whaling is the founder and CEO of The Wealth Titans. A financial education company dedicated to the training and development of individuals to reach their financial goals. Jason left his professional career as an accountant working at a la...

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