When You Can't Repay Your Student Loans

Advice If You Can't Repay Your Student Loan

I'm 23 years old my credit is shot to hell literally.

I have an extreme amount of debt for educational expenses as well as credit card debt and bank debts.

Bank accounts have been closed because of overdrafts.

I am in need of credit counseling. Any advice you can provide would be of help.

Kim

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I'm sorry to hear that. If it makes you feel any better, you are not alone. Too many students take on debt in addition to their student loans and find themselves in the same predicament.

Student loans are federally insured are not dischargeable in bankruptcy. So you have to look at your credit card and bank debt and determine how much good it would do you to get them discharged.

If you were to go bankrupt, how much money will be freed up? Will it be at least 50% of your debt? Will you be able to manage your basic costs of living plus your student loans after bankruptcy?

If not, you are in deep trouble.

If you are not in default on your student loans, you might qualify for forbearance - a year's hiatus in payments. You can also consolidate your loans and achieve a lower monthly payment. Read Student Loan Repayment Options and then contact Sallie Mae and discuss your options.

If you are in default, read the article carefully, you might still qualify for relief if certain circumstances are met. No matter what, it doesn't hurt to contact them and see where you stand.

Since you have to go through credit counseling before you file for bankruptcy anyway, make an appointment with a credit counselor. Your best bet might be your local Consumer Credit Counseling Services office. See if you can get recommendations for a specific counselor from friends and family.

Otherwise, you are going to have to go through a few years of extra work and sacrifice to free up money to pay down your debts to an affordable level.

It would be a shame to file for bankruptcy at your age and it could come back to hurt you, especially in finding higher paying jobs.

Good luck.

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