The Pitfalls of Student Loans!

Whatever you do...don't ever IGNORE your student loans!

Here's 9 good reasons why:

1) You’ll get deeper in debt. Interest will continue to accrue and your balances that seem so daunting now will get even larger. Loans that go to collections will incur additional collection costs of up to 25%.

2) Your credit scores will suffer. Late payments will appear on your credit reports and your credit scores will go down. Negative information may be reported for up to seven years, and for many graduates their credit scores are more important than their college GPAs when it comes to real life.

3) You will eventually go into default. Most federal loans are considered to be in default when a payment has not been made for 270 days. Once you are in default, the government has “extraordinary powers” to collect, as we’ll describe in a moment.

4) You may lose your tax refund every year.  If you have a federal student loan in default, the federal government may intercept it. 

5) Your work income could be garnished.  If you are in default with a federal student loan, the government can garnish up to 15% of your pay. 

6) Co-Borrowers are in as much trouble as YOU. Anyone who co-signs a student loan for you is on the hook 100% for the balance. It doesn’t matter if it was your 80-year-old grandmother who co-signed for you; she is going to be pressured to pay and may be at risk for the same consequences you face.

7) You could be sued. Lawsuits are less common with federal loans than with private ones. (After all, why would the government sue when it has so many other ways to collect?) But a lawsuit is always a possibility especially if you ignore your student loans. If you are sued, you may find you need the help of an attorney experienced in student loan law to raise a defense against the lawsuit.

8) Student loan debt NEVER goes away!  Student loan debt will not go away if you ignore it. There is no statute of limitations on federal loans, which means there is no limit on how long you can be sued. State statute of limitations do apply to private student loans, however, limiting the amount of time they have to sue to collect. But it doesn’t stop them from trying to collect from you — and if you don’t know your rights it may go on indefinitely.

 

9) What to do...when you CAN'T afford to pay on your student loan?

For starters, get your free annual credit reports so you can see which loans are being reported by whom. Then get your free credit score using a service like Credit.com so you have a clear understanding of how this debt is affecting your credit. You can also use the National Student Loan Database to track down your loans.   For federal loans, you can get back on track with a reasonable and affordable payment plan. Start the process at StudentLoans.gov. (Be careful if you talk with a collector or servicer about your options. Some provide borrowers with accurate information, but some do not.) Here’s a guide to options for paying off student loans.

For private loans, you may want to talk with an attorney who understands how to discharge certain private student loans in bankruptcy. It can be tough to qualify, but not impossible. If that’s not an option, you may be able to try to negotiate a settlement.

This article was found on:   Thu, Jun 5, 2014, 4:09pm EDT 

What Happens If I Ignore My Student Loans?

By Gerri Detweiler