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Managing Finances, Student Loans

What’s Next If You Can’t Repay Your Student Loans

By Cindy Sanford

Life happens. Sometimes, so much life happens that it is hard to make your student loan payment. It is important that you take the right steps if this is your situation. Student loans must be repaid and cannot be discharged, even during bankruptcy.

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The first thing you should do is contact your lender or lenders. This is never an easy call to make, but it’s best to be upfront. Tell them what has happened so you can work together and come up with a resolution. You see, student loans are different from other kinds of loans like for a car or a home. If you can’t make those payments, the bank can take away the car or home and resell it to help pay off the debt. That isn’t the case with student loans – they have nothing to sell! So, the payments must be made eventually.

When you call your lenders, they are going to ask what you can do differently to make at least a portion of the payment. Take a hard look at how you spend your money. You will likely need to give up some things, make different living arrangements, consider a second job… it’s not easy but doing whatever you can to maintain a good credit rating is well worth the effort.

Some borrowers benefit from consolidating most or all of their student loans into one loan. In some situations, it allows you to extend the length of time in repayment so your monthly payments may go down. It may also reduce your interest rate depending on what the rate was when you took out your loans compared to what it is when you refinance. While this may seem like an easy solution, if you extend the length of your loan, you may end up paying more in the long run because you’re borrowing the money for longer. Work with your lender or a financial advisor to determine the best path for you.

The Federal government allows you to consolidate all of your federal loans through the Direct Consolidation Loan. Bank of North Dakota has a refinance program for qualified North Dakota residents. It allows you to refinance all of your student loans, including federal student loans, into one payment. There are no fees to take out this loan.  For out-of-state residents who have a Bank of North Dakota loan, you may apply to refinance BND and all private loans through a separate program.

We can’t emphasize enough how important it is to contact your lender. Start talking with them right away so you can come up with a solution that works for both of you!

Cindy Sanford

Cindy Sanford has years of experience working in education as an advisor and mentor as well as hands on experience working with employers both in the private sector and government. Cindy enjoys reading, hiking, trying new foods, travel and spending time with her family especially her grandbaby.

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