Avoid Loan Default

Aug 27, 09 Avoid Loan Default
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The necessity of obtaining a college education in an increasingly technological world is a stark reality for those pondering how they will pay for said education.  For the vast majority of new college entrants, government loans represent the most viable means obtaining cash for school.  However, too many bright-eyed and bushy-tailed freshmen exit school as disillusioned and confused adults unsure of their next steps.  The real world calls.  Answer and Uncle Sam comes calling soon thereafter.  Loan payments are one of the easiest debts to ignore…default on your loans at your own peril.

However, for those who fall behind on their loan payments, the federal government provides relatively generous ways to make good on your loans.  Whether you obtain a deferment or consolidate your loans, the government will give you more than munificent repayment terms.  By consolidating low-interest loans, the number of years you have to repay goes from ten up to thirty.  You can save a substantial amount of money each month through consolidation.  If you lost your job or were the victim of some other unfortunate financial disaster, you can obtain a loan deferment.  This effectively freezes your loan payments, and gives you, typically, up to 18 months to start making payments again.


If you default on your loans, you will find that your options are severely limited.  The lender has sold your loan to a collection agency that will employ any means at their disposal to get the money.  In addition to adding exorbitant fees on top of the loan, collection agencies also notify credit rating agencies about your default.  You will not be able to borrow more money to go to school until you get the loan out of default.  This involves making payments on the loan for at least 9 consecutive months.  These payments are not small.  Default is probably one of the worst financial conditions.  Unfortunately, when you are eighteen and somebody dangles $4,000 dollars in front of your face, the fine print is the least of your concerns.  However, as an older and wiser individual, it definitely pays to know your options.  The alternative is so much worse.

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