Avoiding Student Loan Default

Millions of college and university students and graduates have funded their college education using one of many student loan programs. There is no doubt that a college education will provide not only increased income but also more employment options throughout life. However it will require many years to pay off most student loans. It is not uncommon to have student loan payments extend for 20 or more years.

Many students and graduates will end up using multiple student loans before they get their diploma. Without good student loan consolidation advice a graduate may end up making multiple student loan payments each month all of which will strain a family’s budget. In addition with multiple loan payments it is fairly easy to end up defaulting one or more student loans. Student loan default is serious business especially if you are an entrepreneur or in business for yourself.

Getting behind on your student loan payments can happen as a result of a family emergency, the birth of a child, job change or loss of employment. When this situation arises the worst thing you can do is ignore the problem. Most student loan programs are backed by one of several federal loan programs. As such if you are late and ignore correspondence from your lender your loan will also be in default to Uncle Sam.

If you are having a financial problem and cannot make your student loan payments you should immediately contact your lender. Explain your circumstances and tell them that you fully intend to pay the loan off as soon as you get back on your feet. Frequently there will be programs available to help you. These delayed or reduced payments with forbearance programs are available with both private and federally backed student loans. In most cases the interest on your loan will continue to accrue during the delay. However penalties and collection fees will be avoided if you act in good faith with your lender. This also may be a good time to seek good student loan consolidation advice from your lender.

Again ignoring the problem of being in default on your student loans can cause real problems. Graduates who default on federal student loans may soon be getting a letter from the IRS seeking collection that includes penalties and collection fees. Once you find yourself on the IRS delinquency files your name will stay in their data base forever. If you are in default with a private lender then you will be subject to court ordered collection processes. In addition your credit score will fall like a stone making it more expensive when it comes time to purchase a home or vehicle when you get back on your financial feet.