Avoid Defaulting on Your Student Loans
Student loans have become very popular over the years, and they provide a great way for anyone to get a college education when they are young and pay for it after they begin their career.
Unfortunately, student loans have gotten larger and larger, to the point where many graduates can barely afford to repay them. It’s also harder for recent graduates to find good jobs that allow them to make hefty student loan payments.
On top of that, student loans cannot be discharged in bankruptcy, denying that form of debt relief to struggling graduates.
Missing student loan payments can lead to incredibly persistent collection calls, and if no payments are made for 270 days in a row, your loan can go into default.
Defaulting on a student loan
Defaulting means you loan will be assigned to a third party who will demand the entire outstanding balance of the loan in one payment. Any tax refunds will be confiscated to pay off the debt, and you will be liable for collection costs in addition to your loan amount.
You can be sued to repay your loan, your wages may be garnished, and your credit rating will be affected.
If you plan to go back to school and apply for student loans in the future, you will be denied if you have a defaulted loan. You won’t be able to get a deferment or special forbearance after a default, either.
Clearly, a student loan default has serious consequences, and should be avoided at all costs.
Avoiding default
To avoid these negative consequences, talk to your lender. That includes the people who call when you miss your first few payments. If you can’t make payments at all, act early and apply for a deferment or forbearance. You can also ask for lower payment amounts or other changes to your payment plan that will allow you to keep making your payments. Ask about “income-based repayment” if you want the lowest monthly payment amount.
The important thing is not to go 270+ days without making any kind of payment. Even if you are struggling to get by, make at least one payment to “reset the clock” and avoid that dreaded default.
Photo: uofdenver
