What it means to be in default on your student school loan.

You are in default on your student loan when you do not make payments on your loan for at least 270 days and your lender believes that you will not be making any more payments.

However, the repayment period would depend on the type of loan that the student has taken out. The time period after 90 to 120 days is called the delinquency period. Then the counting of the 270 days begins and at that time the default period begins.

According to the higher education act, the lender has a right to trace the borrower during the delinquency period. The longer the time period is without payment or communications to the lender the higher the penalty can become.

What are the consequences of being in default?

There are many consequences of being in default. And of course they are all negative.

• Bad credit reports
• Extra fees and interest that are added to the original loan amount
• Denial of new loans
• Refusal by your school to release transcripts
• Possible wage garnishment
• Seizure of tax refunds

If your lender cannot find you, the borrower, they will then hand the case over to a government agency. When the loan goes into default the maturity due date dissolves and the whole amount of the student loan becomes due immediately. The lender wants the monies returned and will now follow very strict procedures for collection.

The three steps the agency usually takes are, the treasury offset, (student will be deprived of income tax refunds), wage garnishment, (pretty self-explanatory) and the last one legal procedures.

What is the best way for you to handle the problem of having your loan in default?

Good, let us go there now. We have talked enough about the negative, yet reality aspects. There is hope and a way to get you out of this and to be riding high once again without feeling smothered.

First, the quickest way to resolve the default problem and say goodbye to this mess forever is to pay it off in full. To do this, just contact the holder of your loan for the current pay-off balance and the address of where to send the payment. Maybe you run into an unknown rich relative, obtain five jobs, etc.,

Second, loan consolidation helps you consolidate defaulted loans into a new loan. Contact your lender to discuss what type of consolidation loan would be best for your personal situation. This would create a new loan that you can keep in a CURRENT status by making your payment on time, each and every time.

Third, there is a rehabilitation program that can be of help to you. This curriculum was developed to help students resolve defaulted student loans through consistent payments. You would contact your guarantor to set up monthly payments that are manageable and that are made on time.

After nine payments have been made on time during these consecutive months, your loan is considered “rehabilitated.” And at this point it is taken out of default. The reports that were sent to the national credit bureaus are deleted. You will be given up to nine additional years to repay the loan while continuing to make your monthly payments.