Struggling to repay your student loans? You’re not the only one.
While the national student loan default rate has fallen from 11.8% in 2015 to 11.3%, according to the Washington Post, hundreds of thousands of borrowers are still failing to make payments.
Student Loan Default In a Nutshell
Default happens when you’ve failed to repay your loan – and it can impact your financial well-being for the rest of your life.
After 270 days of not making a payment, your federal student loans will be in default. Private student loans are even less forgiving. Typically, most private loans go into default once you miss three monthly payments. You should always review the terms and conditions of your promissory note to ensure you understand how your lender or loan servicer will handle such situations.
What does this mean for people unable to repay their student loans? A lot. Because it’s incredibly rare for student loans to be discharged in bankruptcy (there’s a handful of cases on the books, but as a general rule, it doesn’t happen), defaulting on your student loans can plague you for years. Your credit will be damaged, your wages may be garnished, Social Security benefits and lottery winnings may also be reduced, and you may be ineligible to receive additional federal financial aid funds. You can even be sued.
There’s a host of consequences you may be hit with for not staying current on your student loan payments. Defaulting may also come back to haunt you when you try to buy a home or make other large purchases.
Nip It in the Bud
One of the best ways to avoid default is to be proactive. If you find you’re struggling, don’t give up! Explore your options. There are several things you can do to keep your head above water. Here are a few good places to start.
Find a Repayment Plan That Works For You
If you’re consistently struggling to make your monthly payments, it’s time to take another look at your repayment plan.
Federal student loans have plenty of repayment plans to choose from, giving you anywhere from 10 to 30 years to repay your loan depending on how your payments are structured. Repayment options for private student loans vary by lender, but most range from 7 to 15 years, with some offering extended terms up to 30 years.
Switching to a more affordable plan could be the thing that keeps you out of default, so if your plan just isn’t cutting it, contact your lender or loan servicer ASAP to find a better fit.