There are more than 42 million students who swim in debt, so there’s really no surprise that more than 11% of the loans are in default right now. This number is really horrifying – it’s a number that shows more than 1 billion dollars which should go to the federal government.
But how did these loans go into the default from the very start?
Well, technically, the explanation is simple: they probably forgot to change a billing address or did not set up automatic payments, or maybe the cost of living is too high.
In the event that you are in this situation, think about the fact that it’s not that hard to get out of a student loan default. Even if you’re full of calls from creditors and your credit score is low, there can be done a plan for recovery.
How can we define a student loan default?
The default of the student loan happens after 270 days passed and you didn’t start to pay. At this point, the loans are considered delinquent. But the way of fixing your student loans and your credit are alike.
How does a federal student loan default affect you in long and short-term?
Considering your default on the federal student loan, the consequences can be for long terms of short terms and can affect your financial life in ways you cannot imagine.
You can have the full unpaid balance on your loan, you’ll lose eligibility for deferment, and the ability to choose another repayment plan, there won’t be any additional federal student assistance anymore, your credit rating will be damaged, so you won’t be able to take out other types of loans. You should also keep in mind that you can be charged for court costs if this goes to trial. But don’t lose your hope just yet.
How to fix a defaulted student loan?
Student loan consolidation
Extraordinary compared to other alternatives for anybody with federal student loans in default is federal student loan consolidation, which helps in combining student loans into an only one loan.
By doing this, you choose to pay monthly, and this makes it even more affordable. Also, you get the benefit of having your loans separated from the defaulted ones. But keep in mind that this also includes another payment plan.
If you decide to choose this and are eligible for this, you’ll get some advantages, too, such as the Public Service Loan Forgiveness.
Student loan rehabilitation
To do this, you’ll have to contact your lender directly and make an agreement with him for a good repayment plan. This plan means that you’ll have to make 9 out of 10 payments in time to your lender and tax returns and garnished wages are not going to be on the list anymore.
After you solve the 9 out of 10 things, your loans will be rehabilitated. Then you’ll have to make a decision about a repayment plan.
