Defaulted Student Loans: What Are the Effects and How to Prevent It?
Defaulted student loans will result to the lender demanding immediate repayment of your remaining college debts.
Once a borrower defaults, he will no longer be eligible to apply for repayment postponement including deferment and forbearance.
Also, unpaid defaulted college debts will ruin your credit rating so the effect is not only on the loan you have taken.
When your debts gets forwarded for collection, your 15% of your wages maybe be garnished and federal income tax may be withheld.
You can no longer apply for other federal debts as a result of defaulted college debts.
How do you prevent your debts from defaulting? There are ways for you to keep your federal college debts current including the following: Have your federal debts consolidated - this refinancing procedure will lengthen your repayment term and in the process lower your monthly payment dues and interest rate.
Rates are currently low so you get a good chance to lock in on a fixed low interest rate for the lifetime of your repayment term.
This will enable you to make your payments on time.
Apply for deferment - there are accepted reasons to have your payments deferred including going back to school, becoming a medical intern or resident and experiencing economic difficulty.
Your payments can also be delayed if you apply for public service deferment like when you serve in the Armed Forces.
Apply for forbearance - this allows you to delay repayment of your debt's principal.
Here you will still be paying for the interest rate but paying for the principal may be delayed.
This option will lessen your monthly repayment burden but extends your repayment term.
You can apply for this if you have a high student loan-to-income ratio.
Applying for debt forgiveness - there are ways that a federal debt can be cancelled like if a teacher works in a low-income area or if a borrower volunteers for the AmeriCorps, Peace Corps, etc.
Defaulted student loans will not let you apply for debt forgiveness, forbearance or deferment so it is absolutely important to keep your loans current.
Once a borrower defaults, he will no longer be eligible to apply for repayment postponement including deferment and forbearance.
Also, unpaid defaulted college debts will ruin your credit rating so the effect is not only on the loan you have taken.
When your debts gets forwarded for collection, your 15% of your wages maybe be garnished and federal income tax may be withheld.
You can no longer apply for other federal debts as a result of defaulted college debts.
How do you prevent your debts from defaulting? There are ways for you to keep your federal college debts current including the following: Have your federal debts consolidated - this refinancing procedure will lengthen your repayment term and in the process lower your monthly payment dues and interest rate.
Rates are currently low so you get a good chance to lock in on a fixed low interest rate for the lifetime of your repayment term.
This will enable you to make your payments on time.
Apply for deferment - there are accepted reasons to have your payments deferred including going back to school, becoming a medical intern or resident and experiencing economic difficulty.
Your payments can also be delayed if you apply for public service deferment like when you serve in the Armed Forces.
Apply for forbearance - this allows you to delay repayment of your debt's principal.
Here you will still be paying for the interest rate but paying for the principal may be delayed.
This option will lessen your monthly repayment burden but extends your repayment term.
You can apply for this if you have a high student loan-to-income ratio.
Applying for debt forgiveness - there are ways that a federal debt can be cancelled like if a teacher works in a low-income area or if a borrower volunteers for the AmeriCorps, Peace Corps, etc.
Defaulted student loans will not let you apply for debt forgiveness, forbearance or deferment so it is absolutely important to keep your loans current.