There are multiple consequences you could face if you were to default on your student loans. Your wages and income tax refunds could be garnished to satisfy the debts. You could be reported to the three credit bureaus. The full amount of the loan becomes due and you could accumulate fees. If you have federal student loans, then you will lose eligibility for helpful repayment programs. Therefore, it is essential to avoid default at any costs. If you do default on student loans, it is crucial to look at your available options for bringing your loans back into good standing.
- Avoid default: There are a few options you could consider to get caught up on payments if you are at risk of defaulting. Consider enrolling in an income-driven repayment plan if you have federal loans. This option could also free up income that is needed to pay back private loans. You could also see if you qualify for an economic hardship deferment through your servicer. For private loan borrowers, you could talk to your lender to see which deferment or payment assistance options (if any) are available for your situation.
- Loan consolidation: You might be able to combine your federal loans into a single Direct Consolidation Loan to get out of default. With this option, you would have to agree to enroll in an income-driven repayment program or you would be required to make three timely monthly payments on the defaulted loans. This is not an option for borrowers with private student loans. In addition, a record of defaulting will remain on your credit history.
- Loan rehabilitation: The Department of Education may allow you to enroll in its loan rehabilitation program if this is your first time defaulting on federal student loans. If you meet the requirements for the program, then your loans could be brought back into good standing. However, this does not happen overnight, and it is not an option for private student loan borrowers. The record of defaulting will not remain on your credit history with this option.
- Negotiate: Private student loan borrowers have fewer options to get out of default. Depending on the circumstances, you could try negotiating a settlement with your lender. You may be expected to pay taxes on the amount that was forgiven.
- Pay the loans in full: Paying your defaulted student loans in full is one of the options for getting out of default the Department of Education lists on its website.
Can a Student Loan Attorney Help with Defaults?
There may be other options that are available for defaulted student loans that our blog has not covered. The Kansas City student loan lawyers at The Sader Law Firm could discuss the specifics of your case to help you discover possible options for resolving your situation.