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If you can’t make your payments, student loan default can negatively impact your credit and affect your loan forgiveness options. If you are unable to make your loan payments, there are a few things you can do to avoid default. Read on to learn more about these consequences of student loan default and ways to avoid it. Below are the most important steps to avoid default. When in doubt, talk to your financial institution about options. Listed below are some of the most common reasons that people default on their loans.
Repercussions of defaulting on a student loan
Defaulting on your student loans can have serious repercussions. Not only do you lose access to federal student aid programs, you may be ineligible for income-driven repayment plans or forbearance plans, and your professional license may be suspended. Your student loan debt can also be a source of credit card harassment and even police arrests. The police will not arrest you, but they may take legal action against you for not paying your loan.
The most immediate repercussion of defaulting on a student loan is a negative mark on your credit report. Your late payments will be reported to the major credit bureaus, and you will likely be contacted by collection agencies or other third parties about the default. If you are currently making payments, you will also have a higher interest rate, and you may not be eligible for deferment or forbearance programs. In addition, your loan may have been transferred to another entity.
The next repercussion is a lawsuit. Even if you do not go to jail for defaulting on your student loan, you could be sued and have your transcript withheld until you pay the debt. You might also be able to lose your job, and your credit score may plummet. While this is not the most serious consequence of defaulting on your student loan, it does impact your financial security and may even put you in danger of bankruptcy.
Ways to avoid defaulting on a student loan
A default on your student loan is a big financial problem for a student, as it can lead to delinquency, a higher interest rate and more individual payments. But there are some ways to avoid defaulting on your student loan. To avoid defaulting on your loan, try to make payments on time, refinance your loan to get a lower interest rate or lower payments, and keep track of your finances.
The first step to avoid defaulting on your student loan is to keep track of your payments. Some loan service providers have income-driven repayment plans that are easier to follow and pay off. If you find that you have missed several payments, make sure you catch them before they get to late. If your monthly payments are irregular or late, consider applying for a deferment or forbearance. Make sure you make your payments consistently to rebuild your credit history.
If you are having trouble making your loan payments, talk to your lender. There may be a recovery option for private student loans that work similarly to federal programs. Or you can negotiate a repayment plan on your own with your lender. Either way, it’s a good idea to speak with a lawyer to help you negotiate a repayment plan that works for you. But if you can’t get in touch with your lender, you can try to find other ways to avoid defaulting on your student loan.
Rehabilitating a defaulted student loan
There are several benefits to rehabilitating a defaulted student loan. For one, it will stop being listed on your credit history as a default. Once it is rehabilitated, collections efforts will cease. This allows you to once again qualify for federal student aid and loan benefits. Furthermore, you’ll be able to avoid collection agencies and garnishments. Listed below are some other benefits of rehabilitating a defaulted student loan.
Once you enter rehabilitation, you should set up a system to make your payments on time. This can include an automatic payment draft from your bank account, a smartphone reminder, or even sticky notes. Whatever method works best for you, it’s important to follow the terms of the rehabilitation agreement. If you don’t follow these terms, your loan will remain in default. However, if you stick to your repayment schedule, you’ll be able to rehabilitate your student loan and get it off your credit report.
When you undergo rehabilitation, the guarantor must try to find a lender willing to purchase the loan. However, this process will not be necessary for Direct Loans. In order to qualify, you must make nine consecutive payments within 20 days of the loan’s due date. You’ll have to make at least six payments, but this will not eliminate the default. The repayment period will be interrupted if you’re serving in the military or a civilian who has been affected by a military action.