Repaying Student Loans

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Once upon a time you took out a federal student loan to finance your college education. The loan may have been a Federal Perkins Loan or a Federal Family Education Loan. It may have been subsidized, based on financial need, or unsubsidized, based on eligibility requirements.

Whatever the type, the first payment date is approaching quickly. But you lack sufficient funds to repay the debt. What should you do?

While you may be tempted to ignore the loan, that’s not the best course of action. Failing to make payments could put you into delinquency or default status. Either can affect your financial history for years, and leave you vulnerable to lawsuits or wage garnishments.

Instead, gather your loan documents and get in touch with your loan holder to inform them of your problem. Solutions to discuss include:

  • Consolidation—You may be able to merge all old loans into one new loan and a single monthly payment.
  • Deferment—This option lets you suspend loan payments, including principal and interest, temporarily.
  • Forbearance—Principal (but not interest) payments are postponed for a short period of time or until a new repayment plan can be formulated.
  • Discharge or cancellation—Loans may be cancelled or discharged under certain conditions.

Determining which strategy is available and suitable takes time. But the benefits to you make it time well spent.

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