What To Do If You Fear Defaulting On Student Loans

[Jun 30, 2008.]

 

For many, that student loan is the only way to reach that higher education. College is a vital step especially in today’s world where not only skill and experience is valued but so is education. With this in mind, students are using grants, scholarships, and even loans to reach their dreams and to achieve that piece of paper.

The problem with student loans comes after graduation which serves as a rude awakening for many. With student loans, the repayment period starts after graduation. Students only realize then that those four or six or eight years of not having to worry about the loan could have been better spent. There is no point in focusing on the past, so it is important to start planning for the future.

If you are worried about defaulting on your student loan then there are a few options open to you.

Now, ideally, your loans should not have been more then what you could have afforded to pay back. The standard guideline for this is to estimate how much your first year’s salary will be after graduation and make certain not to borrow more then that. This will not work for everyone especially for anyone wanting to go into a specialized career path such as medical or law.

You will not want to wait until you are delinquent on the loan repayment to do anything about it. You know your finances well enough to know when you are entering a rough patch and when you will be unable to meet a payment. So, when you approach difficulty you will want to apply for forbearance or a deferment. Your lender will be able to provide specific information about these actions as appropriate to your loan and situation.

Until the deferment has been authorized by the lender you will want to continue making payments.

If you find yourself making far less money then expected, which is a very real possibility, then you need to discuss the situation with your lender. There are several, more permanent solutions to the problem such as extended repayments or income based repayments. Payment plans will differ according to the type of loan you have. Generally, a federally issued loan like those offered through Sallie Mae will have terms more lenient making it easier to work with.

Often times, students encounter difficulty when they have more then one student loan. It is possible to consolidate many of the student loans on the market so you just have to pay only one payment.

The penalties of defaulting on your student loans will vary according to who have the loan through and what kind of loan it is. Some of the more common consequences of default include:

• Garnished wages.


• The debt will be given to a collection’s agency.


• A bad credit score

If you want to avoid defaulting on student loans all together, then only use them as a last resort. If you need a loan make sure it is for the smallest amount possible. When you are required to begin repayment make sure to keep up to date and act quickly should the worse happen.