Consequences of Default on Student Loans
With today's economic conditions and recent graduates struggling to repay their student loans, many are either facing default on their student loans or have already defaulted. The consequences of default on student loans can impact your life for years to come.
Immediate Consequences of Default on a Federal Student Loan
The minute you default on a student loan the balance becomes due immediately. Once this happens, collections agencies may approach you to work out a repayment plan, and their fees along with interest will then be added to the outstanding debt. The interest alone can be as high as 15%, which makes it even harder to repay the loan as this interest will be added to the balance. As well, you'll likely never again qualify to receive federal aid, which includes Pell grants. Forbearance and deferment options will be removed and you may find that any disability income, federal and state tax refunds may face seizure in order to repay your loan.
Private Student Loan Defaults
With a private student loan, you generally have fewer options to rehabilitation your loan and you are at the mercy of the creditor. The lender may eventually file a collection lawsuit against you at which point you should consider hiring a debt defense lawyer.
Credit Report Impact
Having a student loan in default show on your credit report is a damaging entry. Like many negative reports, this can result in denial of credit cards, a home loan, the financing of an automobile and your ability to sign an apartment lease.
If you have existing credit cards or loans it may cause these institutions to raise your interest rate and banks can refuse you when you try to open a checking account. The license for your profession may be revoked and a bad credit rating can affect your ability to attain employment.
Loan Rehabilitation Programs
Most programs start with you making nine qualifying monthly payment to the guarantor. Once you have made these payments on time for that period, the guarantor will draw up a rehabilitation document which you agree to and sign. Once you receive notification from the guarantor, your loan is then consider rehabilitated. Once completed, you'll be assigned a new lender and your loan will no longer be in default. In most cases the default is removed from your credit score.
There are options available to those who are burdened by student loans and unable to repay them. Consolidating all your debts and setting up a rehabilitation program for your loans is one option available to you. Most of these options are clearly laid out at this website
If you have been served with a Student Loan Lawsuit, contact us at Weston Legal today.
We would be happy to answer any additional questions that you may have.
Contact us now for free with no obligation consultation.
Articles about Student Loans
- Consequences of Default on Student Loans
- Delinquent Student Loans
- Student Loan Garnishment
- Default on Private Student Loans
- Private Student Loans in Default