Default On Student Loans
The problem of default on student loans is a serious one that can carry some very steep consequences. Educational debt does not simply go away upon graduation. This indebtedness will remain even if a student looses a job, fails to graduate or is underemployed. Any time a borrower goes for more than two hundred and seventy days without making payments on educational debt, that borrower is seen as defaulting on the loan. Educational debts cannot be discharged through a bankruptcy proceeding. The only time that these loans can be even partially discharged would be in the event of a graduate proving a case of extreme hardship. This can be very hard to proof. A graduate must show that they cannot hope to maintain even the most meager standard of living while paying off the loan. All in all, it is obviously best not to default on student loans. Consequences for failing to make good on educational debt can include garnished wages and a severely damaged credit rating. A wise student will take steps to avoid the possibility of defaulting while still in school. This can start with taking pains to limit the amount of debt that is taken on while pursuing a degree. If problems paying off the indebtedness do arise, a borrower should always contact the lender and try to work out a plan for repayment.
There are many serious consequences in the event of a default on student loans. A debtor may find themselves facing the pressures of a collection agency, which is seldom considered a pleasant experience. Many borrowers are unaware of the fact that they are responsible for any costs that are incurred when a creditor must pursue their personal bad debt. Borrowers can also be sued to recover the complete debt that is involved in a defaulted loan. Wages can also be garnished to obtain payment. For some borrowers, tax refunds at both the state and local level can be seized. If a debtor is receiving some form of Social Security benefit, that benefit can be withheld and applied to the loan balance. A graduate's personal credit rating can be greatly and negatively impacted should they default on student loans. A poor credit rating can mean that an individual could have a very difficult time getting a loan for such things as home mortgages, automobiles, or credit card accounts. In some cases, a very poor credit rating can limit a graduate's ability to get a job. In order to receive more federal aide, a borrower must repay anything that is owed on the loan, and must also make six or more consecutive payments each month, and these payments must be made on time.
In addition to these penalties, there are other serious consequences for anyone who chooses to default on student loans. If a borrower needs to obtain or renew a professional license, this will not be permitted. After dealing with all of these consequences, a borrower will still owe the entire debt of the original loan. The wisest course would off course be to avoid committing default on student loans in the first place. A good rule of thumb for students would be to anticipate the income that they will be earning upon graduation. If, upon graduation a student's debt will exceed twice the amount of yearly income that the graduate can expect to earn, than that student is most likely borrowing too much money. Before signing any loan ingredient, borrowers should make sure that they understand all the terms of the loan including interest rates, penalties and due dates. If there is likely to be a difficulty making payments, a borrower should make contact with the lender as soon as possible. Some lenders might be willing to work out some kind of solution with the lender. The blessings of generosity are discussed in the Bible. "The liberal soul shall be made fat: and he that watereth shall be watered also himself." (Proverbs 11:25)
If an individual wants to get back on track after a default on student loans, there are specific steps that can be taken to achieve this. These options could include loan rehabilitation, debt consolidation, or loan consolidation. Loan rehabilitation involves working out repayment arrangements with the lender and then following through with regular payments. For the loan rehabilitation to be effective all payments must be made on a voluntary basis. These payments can't be a result of garnished wages or seized property. If a borrower is able to make these payments, eligibility for further aid can be restored. Another approach to setting things right after defaulting on educational debt might be loan consolidation. Rolling all student loans into one will mean that the borrower is only responsible for one monthly payment. This can ease financial stress and make repayment more feasible.
In a worse case scenario, many students look to bankruptcy as an option when dealing with educational debt. However, bankruptcy is not a good choice after a default on student loans. This is because bankruptcy will not discharge an educational loan in the same way that it can discharge other kinds of debts. Only in the event of severe hardship can a bankruptcy filing make a difference in getting out from under educational debt. If an individual becomes permanently disabled and can provide medical proof of this disability, an educational loan may be canceled. Deferring payments may also be an available option for some borrowers.
Student Loan Debt SettlementReaching a student loan debt settlement can bring needed relief to individuals who are struggling to make monthly payments on educational loans. The need for such settlements will only arise when a student has difficulty meeting the demands of college debts. Professional negotiators may be brought in to attempt to reach some kind of agreement on behalf of both the borrower and the lender. In general, lenders hold the upper hand as to what they will or will not agree to. A debtor has signed an agreement to pay off the indebtedness and it can be difficult for a debtor to persuade a lender to settle for anything less than the original terms of the loans in question. Still, negotiators may be able to persuade a lender to make certain adjustments. These adjustments could include having fees and penalties waived, interest rates lowered or allowing the borrower more time to pay off the loan. In some cases, lower interest rates and longer terms can result in lower monthly payments. If a debtor can handle the lower payments, a deal between the borrower and the lender may be possible. However, some student loan debt settlement negotiators may charge very high fees. A struggling borrower may have a difficult time paying the negotiator for his services.
Successful student loan debt settlement can make a huge difference in the lives of many debtors. The fact that, generally speaking, educational debts can no longer be discharged in a bankruptcy proceeding may further complicate the matter. A debt that is not dischargeable means that anyone who files for bankruptcy will still have to pay off educational loans. There may be cases, however, that will allow a borrower to discharge delinquent educational debts during a bankruptcy. If sufficient hardship on the borrower or the dependants of the borrower can be proven, there may be a hope of leaving this indebtedness behind by filing for bankruptcy. Also, if a student can prove that they do not have the means to pay a loan back, discharge may be a possibility. Hardship may be defined as a minimal standard of living as a result of paying back the debts. Minimal would be considered living at the poverty line as established by local standards. A debtor must also be able to prove that the situation will not get better over the life of the loans. Certain good faith efforts must also be demonstrated. These efforts include attempts to make payments as well as any attempts to make more money while cutting back on expenses. If these attempts at discharge fail, some form of student loan debt settlement may be the only available option.
In the event of a delinquency, a debtor would be wise to attempt to reach some kind of student loan debt settlement with the original lender rather than a guarantee agency. Guarantee agencies will charge very high collection costs once the loan has been turned over to them. In some cases, the original lender will not wish to take the loan back or to work with the defaulting debtor. Borrowers who choose to enter into some kind of debts consolidation plan can only be charge collection costs that are considered reasonable according to federal law. When pursuing student loan debt settlement, there may be a choice of options that are available. In addition to negotiating with lenders, a borrower may wish to enter credit counseling, or to refinance the debts through consolidation loans. When a new loan can be attained, this is the option that will do very little in the way of damage to a debtor's credit rating. However, this option may be a difficult one for many borrowers to achieve. If a defaulted student loan has damaged a borrower's credit score, gaining approval on a brand new form of financing will be nearly impossible. God Himself can protect and encourage believers, as the Bible often states. "But thou, O Lord, art a shield for me; my glory, and the lifter up of mine head." (Psalm 3:3)
Should a borrower opt to work out a student loan debt settlement through negotiation, this approach can provide an answer to the dilemma. Once a debtor has signed on with a negotiator, the debtor's credit rating will most likely suffer. These debtors will generally be considered a poor risk by many lending institutions in the future. Negotiators will contact the lenders and work to come up with some kind of agreement. A successful negotiator could be able to reduce the sum total of indebtedness by a great deal. However, there are many professionals in the field who employ practices that could be considered predatory. It is generally best to work with an organization that does more than just negotiate, collect huge fees, and run. A reputable organization will also counsel the client and provide education on wise budgeting and reasonable spending habits.
Any student who is just beginning their education can take steps to avoid facing student loan debt settlement in the future. Often, individuals are so focused on completing their education at any cost that they fail to understand the ramifications of their borrowing activity. Pursuing grants rather than simply taking on additional debts can be a good solution. Many employers will also provide tuition help for employees and this can be a good source of funding as are awards and scholarships. Credit card debt is easy to abuse, particularly during the years spent earning a degree. Students who are looking to the future will avoid this dangerous trap.