You have defaulted on your student loan and looking for ways and means to get out of such situation? Look right here and find out how to tackle such issue. Also, you get to know how to prevent it as new borrowers.
Most people try to access loans without knowing the consequences behind defaulting a student loan. Missing a loan payment can affect a borrower severely but that doesn’t mean there is no way out of a defaulted student loan. In every loan contract the terms and conditions are spelt out clearly especially on miss payment.
However, according to most student loan contracts, failure to make any payment for 270-360 days with any preparation or discussion with your lender for postponement will lead to default.
Defaulting on student loan comes with penalties and advantages.
What does it mean by student default loan?
In a simple form, we can say a defaulted student loan is when repayment of loan is not made according to the loan contract and there is a miss payment for a long time.
Effects of defaulted student loans
- You will be prevented from joining the Armed Forces
- You can’t access any federal loans until the defaulted loan is full paid.
- It will affect your credit score for up to 7 years.
- There might be a possibility of holding unto your social security benefits payments by the government.
- This is one serious act that can lead to the court and be sued.
- You won’t be able to defer your loan payment when you fall into default.
- Your wages can be garnish and income tax withheld by the loan lender.
- One main consequence of defaulted loan is that your loan tends to increase with interest.
- This can also lead to suspension of one’s professional license.
How to prevent defaulted on student loan
“As the saying goes preventing is better than cure”. Preventing yourself as a borrower from defaulting loans is better than falling into it and finding solutions. Therefore you should take note of these simple way you can prevent yourself from defaulting on student loans.
- Make sure you pay loan on time according to contract.
- Do not borrow much money that might not match your financial strength.
- Notify your lender when you miss several payments for deferment.
- Find out other means that could help you from have your loan defaulted.
How to get out of defaulted student loans
- It’s is noted that the easiest way to solve the problem of a defaulted loan is by making payment of loan but are two best ways to get this done.
- In such situation you can either go in for a loan rehabilitation or loan consolidation. These are the two best ways to have your defaulted loan taken care of, although it will still affect your credit for 7 years.
- For loan rehabilitation, the borrower will have to get in touch with its lender with a reasonable and affordable written statement for making payments. The lending agency will then determine the period you make such payment.
- You will be requested to make nine monthly loan payments within 10 consecutive months on 15% of your discretionary income, but you also ask for a lower amount.
- This type of practice will help remove the default tag on your loan as well as stoppage of garnish of your wages. It will therefore show late payment before your loan went into default but record of default will be removed from your credit history. You will be able to enjoy certain benefits after.
- Loan consolidation is regard as the best option among the other two when it comes to getting rid of defaulted student loans. In this aspect, make three full payments on time and for some consecutive months on the defaulted student loan. Also, go into agreement with the collecting agency to repay your loan under an income-driven repayment plan.