How to face defaulted student loans

Times are indeed tough! Just because you didn’t graduate or that you can’t find work doesn’t mean that you can escape from paying your student loans. The worst nightmare anyone can have, on top of all those money crises, is to have defaulted student loans. Unless you have an exceptional excuse like bankruptcy, chances are, you still need to make a deal in how you can repay these loans in time. Besides, defaulted student loans don’t look good on your credit report.

Just how can you have defaulted student loans? Take a leaf from Section 435 of the Higher Education Act. It says that once payment hasn’t been received for 270 consecutive days, where the lender had exhausted all options to collect without any success – that is the time when a default happens. It’s just too obvious that for some reasons, you are really avoiding repayment of your student loans. So, the next question is: What Happens Now?

The Consequences of Defaulted Student Loans

You reap what you sow, and having defaulted student loans can make you suffer:

1. Offsets

If you think that you’re untouchable, think again. The IRS ( Internal Revenue Service ) can stop your income tax refund until your student loans are paid in full.

2. Garnish

We’re not talking about your kitchen parsley, but your very paycheck. The federal government can take up to 15% of your income, though it can’t take more than 30 times of the current minimum wage rate. You can negotiate a payment schedule to avoid this.

3. Loss of Federal Benefits

Say goodbye to some of your federal benefits like those of your Social Security’s retirement and disability benefits. The good news is that your Supplemental Security Income is safe, plus, amount taken won’t exceed 15% of the total benefits you have.

4. Legal Action

Have you ever been sued? It is not a pleasant experience and for this, you better avoid defaulted student loans. You can’t anymore apply for a deferment or forbearance when it happens, plus, you can be sued indefinitely ( which means having a bad record as long as you don’t settle ).

How Do You Address Defaulted Student Loans?

By learning a few good tips from the U.S. Department of Education, you can follow these steps:

1. Contact their Default Resolution Group at 1-800-621-3115 to know your payment options.

2. You can mail in a check or money order payment, or you may pay using any of these credit or debit cards: Visa, Mastercard, American Express, or Discover.

3. If you were given a grant amount that exceeds what should have been given to you, you may be required repayment for the extra amount or over payment. You may also be asked to repay if you quit early from the program. This applies to Federal Pell Grants, FSEOG, ACG, TEACH Grants, and National SMART Grants.

To avoid defaulted student loans in the first place, just borrow as little as possible and make sure you pay on time. A loan is a responsibility, so take time to plan your moves well. Always make your loan repayment a number one priority and strive to be free of it in the future. Life is like a roller coaster ride, with ups and downs, and when you’re on the low – you can always go for a loan deferment or forbearance. Pay Your Dues!

READINGS:

http://www2.ed.gov/offices/OSFAP/DCS/index.html

http://www.nolo.com/legal-encyclopedia/article-29859.html

http://www.finaid.org/loans/default.phtml

http://student-loans.suite101.com/article.cfm/consequences_of_student_loan_default