Home > Student Loans > What to Do When You Have Student Loan Debt But No Degree

Comments 0 Comments

The vast majority of borrowers who default on their student loans are those without degrees — in 2009, 62.9% of defaulters had no degree, according to a 2014 report from New America Ed Central. Statistically speaking, that makes it a ton of sense: Workers with college degrees have a much higher earning potential than those without, but getting that education has become increasingly expensive. If you invest money in a degree you never earn, it’s probably going to hurt your bank account.

There’s a common attitude among borrowers with no degree that because they didn’t earn the degree or certificate they took out loans for, they don’t have to repay them. Doing nothing about your student loans is a bad, costly and destructive thing to do.

In debt and degree-less — it’s certainly an unpleasant limbo. Unfortunately, you still have to deal with that debt.

“I can’t stress enough of not letting it linger,” said Terrence Banks, credit and student loan counselor at ClearPoint Credit Counseling Solutions. He said about half the calls he gets are people without degrees who already defaulted on their loans. “Their excuse is, ”’Cause I never finished, I didn’t even think about it.’ A lot of times they don’t even know how much they took out.”

A 3-Step Plan to Begin Repaying

Step one: Figure out who your lender is and how much you owe. This information should be on your credit reports, and you’re entitled to free annual copies from each of the three major credit reporting agencies: Equifax, Experian and TransUnion. Contact information should also be listed next to the account, but if it’s not, an Internet search will help you get that information.

Keep in mind you may have multiple lenders, and you have to stay on top of each loan you took out. Tracking down multiple lenders with different repayment terms may be frustrating, but it’s much less unpleasant than defaulting and all the consequences that come with it, like wage garnishment and a trashed credit standing.

Step two: Explore your repayment options. If you took out federal student loans, ask about income-based repayment plans.

“Typically the income contingent or income driven loan repayment plans are the best options for those out of the gate who have to go into repayment on their student loans,” said Jason DiLorenzo from GL Advisors, a financial adviser group that specializes in student loans. You generally have to start repaying your student loans as soon as (or shortly after) you drop below full-time enrollment. As the name indicates, you’d make payments much in line with your earnings, and after 25 years, your remaining balance may be forgiven.

Making private student loans more affordable is tricky, but doable.

“If you’re making a salary, regardless of if you have a degree, there are some private lenders who are willing to sharpen their pencils and lower your rates,” DiLorenzo said. “There are also some companies out there offering refinancing for private loan borrowers.”

Step three: Stick to your plan. If you’re going to get rid of your debt in the least painful way possible, you have to prioritize your education debt and maintain a budget that allows you to stay current on loan payments. Late payments on any kind of loan will hurt your credit score, the effects of which you’ll feel throughout your finances. (You can see how your student loans are affecting your credit by pulling your credit scores regularly. Credit.com offers two credit scores and a summary of your credit report for free, updated every 14 days.)

“Just know that you’re not alone. You’re going to be able to handle this,” Banks said. “For people feeling overwhelmed by the process, there are plenty of nonprofit credit counseling agencies, some of which specialize in student loans, that can help you navigate the process.”

Most important: You have to get it started. The longer you let your education debt go, the harder it will be to get out of it. Banks said he gets a lot of calls from older borrowers, because they’d forgotten about it until they started to see their wages garnished. Student loans are rarely discharged in bankruptcy, which is why it’s crucial to stay on top of them.

“Find out who your lenders are. Start making calls,” Banks said. “You’re not going to get everything done on that particular day, but just start the process.”

More on Student Loans:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team