What to do if You Default on a Student Loan
It’s possible that you didn’t realize your loan came out of deferment, and you missed some payments. Unfortunately, we see this kind of thing all the time. If you’ve missed even one payment, then you are at risk of defaulting on your student loan. Defaulting on your loan has some serious consequences. However, we’re going to show you what to do if you default on a Student Loan and how to fix things as quickly as possible to avoid any more damage.
You have several options for getting your loan out of default:
1. Loan Repayment – One option for getting out of default is repaying your defaulted student loan in FULL. Meaning you pay the entire balance of the loan. This is usually not feasible for most people, but if you happen to be one of the lucky ones and can afford this, then we suggest you do this ASAP.
2. Loan Rehabilitation – To rehabilitate your current loan, you and your loan service provider must work together and agree on a reasonable and affordable payment plan that you can handle. This is much easier then you may think. Give your loan service provider a call and just ask. It never hurts to ask!
3. Loan Consolidation – This option lets you consolidate (combine) multiple federal student loans into just one loan. The result is a single monthly payment instead of multiple payments, and it could be lower depending on the interest rate. There is no application fee to consolidate your federal loans. If you are contacted by someone offering to consolidate for a fee, you’re not dealing with a true or reputable US Dept. of Education consolidation service.
NOTE: There are Pros and Cons to each of these options, so it’s best to research each one carefully before you decide which option is best for you.
Your credit score may take a hit for your missed payments, but you can build your credit back up. The process is slow, and there is NO quick fix or magic company that can fix it for you for a fee. That’s a scam and should be avoided at all costs!
To build your credit score back up again, you need to start making payments on-time and as soon as possible. Pay more than the minimum (if you can) so that it doesn’t all just go towards the interest. Be patient and check your credit report and credit score often. If you find any errors or mistakes on your credit report, get them fixed ASAP.
Defaulting on student loans is a pretty serious thing, but it’s not the end of the world. Just don’t ignore it. You have to move fast and be proactive! Call your loan service provider right away and see what your options are, and how you can resolve this mess as quickly as possible.
If you have any questions about Student Loans or unsecured debt questions, let us know by leaving a comment below. We’ll try to answer your questions and get you the information you need!