| Defaulted Student Loan |
| Written by Susan Adam | |
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Getting behind on student loan payments is a problem faced my most of the loan borrowers. But, do remember that a couple of defaults are not an issue. Non-payment of a single installment in 9 months will get your name entered in the defaulters list. A recession affected market and rising education fee has increased the cases of defaulted student loans. The U.S. Department of Education in its report states that the default rate of federally The moment a student loan gets into “default” category, the balance of the total loan amount becomes due immediately. The situation becomes critical as you can not use other options for delayed payment like student loan deferment and forbearance. In long term, unpaid defaulted loan has consequences other than just the loan directly. It is directly going to hit your credit report. When the loan is forwarded for collection, all your earned wages and federal income tax refunds can be withheld by the authority. You will also lose the eligibility to apply for other type of federal loans. For students, it is just impossible to repay the defaulted student loan at once because of its big size. But, there are different alternatives of repaying student loan, regaining eligibility to get more loans and improving credit scores. The suggestions might appear to be very general, but they are hard to implement. If you are finding it difficult to pay back the student loan, call your lender and request him to put the payments on hold, till the time you get back on your feet. Most of the federal loans have a forbearance option, where borrower can suspend payments on temporary basis but the interest is still levied on the amount. There are some need based loans offered by organizations that qualify for “deferment.” In this case the government is responsible to cover an interest payment for a certain time period. You can use deferments and forbearance options for a maximum time period of three years, per loan. Borrowers can also get some relief in loan payment by asking the lender to lower the monthly payment. It is true that prevention is better than cure. To avoid yourself getting struck in defaulting student loan, you should adopt mechanisms for keeping the federal student loan current (not defaulted). But how? Opting for a student loan consolidation will keep you away from the worries of being tagged as a defaulter. The whole idea behind student loan consolidation is to reduce the rate of interest and increase the term of your loan. This will make your loan more affordable and you will be able to make on-time payments. You can defer the loan payment under specific conditions. Medical internship, economic hardship, continued education are some common reasons for deferment. If you are serving in armed forces and other such fields, you are also eligible to get “public service” deferment that will delay the loan payment process. Coming back to consolidation loans , which are meant to bundle consolidate defaulted student loan in a single loan. The moment you get a consolidation loan, all your existing student loans are paid off and the total balance revolves around only one consolidation loan. There are some other benefits of consolidation loan:
Getting into student loan deferment is very different from regular loans. Ignoring the problem means building space for bigger problems. Therefore, it is always better to find out solutions to your problem, may be through a consolidation loan or by talking to the lender. |
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