Student Loan Market Struggles and Avoiding Default

Due to many recent defaults on student loans and fluctuations in the market, lenders are projecting lower and lower profits made on student loans. This has caused some lenders to pull out of the student loan market all together. The government has also cut subsidies to student loan lenders giving them less incentive to offer special rates.
This does not mean that you cannot find good rates and good terms on student loans. You may not see as many deals and incentives as you used to, but there are still good loans out there. You may just end up shopping around more than you expected. Use web sites that offer comparisons of terms and rates from many lenders to help bring some clarity to your search.
Once you have your student loan, it is important to follow the rules and avoid defaulting at all costs. Defaulting is a major problem that could be avoided if more people had shopped around before they got into a situation with a loan that may not have been the best fit for their situation. The internet gives us the advantage of sitting at home and doing our own research. Long gone are the days of driving from bank to bank, or just accepting the list of lenders that our school offered.
Avoiding default can be as simple as calling your lender. Ask about repayment programs. Some payments can be figured using your income, meaning that you pay more only when you make more money. Forbearance can be granted or payments can be deferred if you qualify. The trick is that you have to ask. Simply not making a payment is not a wise decision.
Student loans are considered in default after only sixty days. Your loan balance can jump up to more than you originally borrowed. Even bankruptcy does not make all student loans go away. Even worse, the government has the power to collect on many loans. They first go the IRS and take any refunds or credits that you have due. If the balance is not covered by that, then they can garnish your wages. You will have no control over the government getting to your money before you do. They even collect your Social Security benefits or any other government monies that you have coming to you. If they cannot get enough that way, then they can sue you.
Defaulting on student loans is a serious matter and you should take every step possible to avoid it. Make sure that the student loan you select meets your needs. Shop around and make sure that the terms are acceptable before you accept. Ask about special terms such as forbearance, deferments, financial hardships and repayment options. Once you have compared lenders and types of loans online, you will be better equipped to avoid defaulting on your student loans.


About the Author: Evelyn Saunders, a retired teacher, is the editor for student-loans.net, a provider of student loans and information on how to get private student loans as well as consolidation. For more information, please visit http://www.student-loans.net.

What Happens When You Default: Student Loans

You can be considered in default of your student loans after one or two missed payments. Even if you make partial payments your account can go into a default status. This is not a bill that you can ignore without serious repercussions. You may think that you are just racking up a few late fees, but you could not be more wrong.

You will be charged late fees, of course, but what you may not realize is that these late fees can amount to more than you originally borrowed. There is no cap on how high your late fees can go. Collection efforts also come with a charge. The Department of Education has to hire a collection agency to do their dirty work and you get charged for it.

Your interest rate can jump up astronomically every month that you do not pay. This can also quickly raise your balance to way more than you ever thought possible. The Department of Education has the power to get their money by any means possible. Therefore, this huge number on paper will eventually come out of your pocket.

The IRS can send any refunds due to you directly to the student loan manager. This is usually their first line of defense when it comes to getting their money. They usually go to the IRS after ninety days of no payments, so it does not take long. Instead of getting your refund, you may get a letter stating that it has been sent to your student loan lender instead. If this amount does not cover the amount that you owe, then the next step is taken.

Your wages can be garnished and the amount you owe will start coming out of your paycheck. This can be devastating for most families and if you thought you were having trouble paying your bills before, try having your paycheck taken.

If that is still not enough, then they can sue you for the money that you owe. If you receive any kind of federal benefits, then they can intercept those as well. The bottom line is that you can not get away with not paying your student loans off.

If you are in default, call your loan manager and figure out the best steps to take. There are options like deferment, forbearance, and loan cancellation. Sometimes bankruptcy can dismiss student loans, but not always. The best thing to do is to lay out all of your options and come up with a solution. Some loans have income based payments that are adjustable depending on how much money you make. There are options out there for you, but you do have to ask. Paying off your student loans can be within your reach if you try.

About the Author: Evelyn Saunders, a retired teacher, is the editor for student-loans.net, a provider of student loans and information on how to get private student loans as well as consolidation. For more information, please visit http://www.student-loans.net.