Being In Default On Student Loans

DEFAULT Definitely, Don’t Do It

When a student borrows money for his or her education and then fails to pay that money back, either upon graduation or when dropping out of school, a borrower enters into DEFAULT. Default is not a good thing and there are many, many consequences that most young adults don’t think about or sometimes care about. Entering into default has long-standing consequences. Almost all loan programs offer some type of online guidance in case you are not able to pay your loan back, and most of the time, it only takes a few minutes to keep yourself from going into default. If, at any time, you cannot make your monthly payments, call and speak with your lender or go online and see if you qualify for a deferment or forbearance, both of which will keep you out of default.

The following are just a few of the consequences a borrower may experience if he or she enters into default:

*The entire amount of your loans will be immediately due. If that amount is not paid, your loan will be sent to a collection agency. People will hound you constantly to fix the situation by paying very large sums of money NOW.

*You will be liable for all the costs of collecting the money—that means court costs and attorney fees.

*Your credit score will drop and you will find it very difficult to establish any new lines of credit. This means getting a car, a house, a cell phone, maybe even a job, pretty much anything will be difficult or impossible for you to do with a default on your credit.

*You will not be able to get any MORE financial aid until your debt is paid or taken care of. So when you got that Bachelor’s degree in Sanskrit and now you realize the need for a different degree, you will not be able to pay for it, until you get out of default.

*Your wages can be garnished. So if you think you can live off your paycheck, try doing that with a considerable amount withheld to pay off your loans.

*Can’t wait to get your income tax return? You’ll keep on waiting if you are in default. All your state and federal returns will be withheld and be used to pay off your student loans.

*If your job requires you to hold some type of professional license, you need to be aware that in some situations, if you are in default you will not be able to get or renew these licenses.

You CAN get out of DEFAULT by:

*Making 12 regular payments ON TIME for the course of one year. After 6 months of repayment, you will be eligible for financial aid again.

You can STAY OUT of DEFAULT by postponing your payment through:

*Deferments, and

*Forbearance

Deferments allow a borrower to postpone payments while in school and in other special situations. Deferments are not granted automatically and you must ask for one first. In most deferments, the interest stops accruing. Forbearances allow a borrower to postpone payments but the interest rate continues to accrue even though the borrower is not making payments. Again, a student must first ask for forbearance and these are also not automatically granted.