loan
By: Katie Spencer
Avoid Default at All Costs
A Student’s Financial Guide to Success
Skipping class is nothing compared to skipping a student loan payment. The consequences
of defaulting on a student loan payment when they are past due are far more
severe. At this point in time, your lender can file a default claim with the
guarantor of your loan. Following payment of the claim, the guarantor may initiate
proceedings to embellish your wages, confiscate your state and federal tax refunds
and other payments made to you by the federal government, or even assign your
loan to the federal government for litigation against you. This is the last
thing you want to happen to you especially just after graduating. There are
so many student financial guides provided for you at your fingertips that it’s
important to utilize them.
The majority of college students
that graduate end up with some sort of debt and having a past due payment on you
student loan(s) is definitely not in anyone’s future. This negative information
may remain on your credit report for up to seven years, affecting your ability
to purchase a home or car loan, or other credit purchases, which is what a lot
of college students look to do or have to, once they graduate.
Follow these wise tips to avoid defaulting on your student loan(s):
• Graduate! - Students who complete college are less likely to have trouble in
the future making monthly payments. A college degree also increases your chances
of receiving a higher paying job.
• Contact your lender - If you think that you are going to be unable to make a
monthly payment call your lender and they can discuss alternatives such as deferments
or forbearances, which allow you to postpone payments, as well as choosing different
repayment plans.
• Take advantage of free services – Accept discounts and rebates offered by your
lender as well as free services offered to you by your school. If your lender
offers repayment benefits for responsible borrowers, you should definitely sign
up! You can save up to hundreds or even thousands of dollars for just having your
payment deducted automatically from a bank account or making payments before the
due date.
• Pay off other debts during your grace period – The grace period is the time
after you leave school and before your first student loan payment is due which
is usually six months. If you can make 13 payments within a year instead of 12
you will see a big difference in your overall balance.
• Use loan for student expenses only - A student loan should be used for student
expenses only. Although it may be tempting to use student loan money for college
football tickets, midnight pizza while cramming for finals, or a Florida spring
break trip, but be sure to resist this temptation.
If making payments on time comes as a challenge for you, there are several ways
you can postpone repayment of your student loans. This way, you are not stressed
or in danger of defaulting on your loan.
Ways to postpone your repayment
There are two ways to postpone repayment of your loans, by deferment and forbearance.
Deferment is an entitlement that must be granted if you meet specific conditions,
but you're not automatically entitled to a forbearance, which is granted at the
discretion of your lender. Both forbearance and deferment allow you to temporarily
cease making payments, or make smaller monthly payments than required by your
repayment schedule.
However if you choose to postpone your repayment of your loans, interest will
still continue to accrue. On the other hand, with a subsidized student loan, the
government pays the interest that accrues during a period of authorized deferment.
You’re only responsibility is for any interest that accrues during any period
of forbearance and for interest that accrues on an unsubsidized student loan during
a period of deferment.
The types of deferment are:
• In-school deferment
• Unemployment deferment
• Education-related deferment
• Economic hardship deferment
• Parental leave/working mother deferment
• PLUS borrower with dependent student deferment
• Public borrower with dependent deferment
• Public service deferment
• Temporary disability deferment
Contact your lender to see if you are applicable for either deferment or forbearance
if you feel you won’t be able to make your payments on time.
If you're having financial difficulties, you’re not alone. The thing to remember
is that you have a variety of options to choose from. There are people who can
help answer questions for you and deal with unfortunate circumstances that may
arise before and during repayment, or help you with decisions regarding forbearance
and deferment.
Want to learn more about college financial success, check out http://www.studentfinancialguide.com,
it’s full of information pertaining to college financial help before, during,
and after your college years!
About the author:
Katie Spencer is a contributing writer for a number of international financial
journals both online and in print. Katie has been delivering financial education
to the public in a variety of areas to include college budgeting, credit and debt
management, and money saving tips). Recently, Katie has been in partnership with
a national educational foundation to deliver financial advice to American consumers
via the web. For more information and to read the latest articles published by
Katie, please visit http://www.inchargeorg.org.
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