In these economic times many more people than ever are considering the consequences that they will have to face should they default on their student loan. Student loan default is increasingly difficult these days, debt that you could at one time discharge with a bankruptcy is now permanent leaving the borrower very few options when they hit difficult economic times. When you stop making your regularly scheduled monthly payments on your student loan debt, you officially go into default after 270 days. It is important to note that laws are constantly changing as are court cases that challenge the fact that student loan debt cannot be discharged during bankruptcy. If you are having trouble with your loans be certain to monitor developments and court cases in order to know if and when the status quo changes.
What happens when you default on your loan
The first thing you need to know is that even though you owe this debt to the government there is no debtors prison in the United States. This means they cannot throw you in jail for not paying your loan. They can issue a bench warrant for you to complete paperwork and they can throw you in jail for lying or fraud, but if you keep up with the paperwork and never lie, you will not be going to jail for a student loan default. You will though have bad marks on your credit and be subjected to collection efforts by the organization that holds the loan. This may include being sued in court where the company can get a judgment against you. If they get this judgment then they can take the money from your bank accounts, garnish your wages, and even take your tax return money should you be getting a return when you file your taxes.
What You Should Do
The first thing you should do if you know you are heading toward official default is seek out counseling and relief from the government. There are countless programs available to people to help them pay there student loans. For example, there are some programs that will pay the loan for you. There are also a lot of jobs within the Federal government that will pay off your loans, this may seem drastic, but if you cannot pay your loans on your own with your existing job, it must not pay too well, so considering getting a job with the Federal government should not be beyond conceivable. There are also many ways to get a student loan deferment on payments as well as many programs that allow for consolidation and refinance of existing loans into lower payment structures. The only thing you should not do when nearing default is ignore the situation. Ignoring it is when you will get into the most problems. Seek out counseling, advice, and payment assistance programs, you will be happy you did.
I’ve defaulted, what now?
Once you have caught up on your loan and are no longer in default you should immediately seek out additional counseling on how to repair and fix your credit going into the future. You should also seek out counselors that can help you understand how you got into the problems that led to default and how to avoid those problems in the future. Sometimes defaulting on debt is a matter of losing income and other times it is a matter of budgeting or cash flow. Getting a professional to help you understand how these factors have effected you and how they can affect you in the future is very important in understanding your situation as well as avoiding a similar situation in the future.
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