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College students have a nice way of falling into debt with student loans and then when it comes time to pay it off after college it can be a complete mess. Many people can’t or forget to pay off their student loans and it eventually ends up becoming a defaulted loan that can kill any person’s credit.

We are going to give you a bit of info on what happens and how to stay away from the pain.  If you are already in trouble then you will definitely need to read this to start making some changes quick.

Process To The Credit Dumps

One of the first things that happens is that you are late on a payment and it comes up to bite you in the butt. Even though this shouldn’t even be an issue, it still can happen for whatever reason and obviously you can pay it back very quickly. Then you will get a delinquency notice from your lender reminding you are late.

Eventually this will lead to phone calls or bringing in a guaranty agency that will yell at you for your lack of action. They can get a little more angry, but they really know how to hit you hard right where it hurts the most…your credit. They are the ones that contact the national credit bureaus and tell them all of your dirty little credit secrets that you never wanted them to know.

Your status for the student loan goes to default. If you have some sort of collateral with a public lender then they have the right to take that from you. This can really be a rough time for you that may require a lot of tissue and sugar to get through the lonely nights.

This leads to a complete nightmare because now you might as well have the scarlet letter on your chest as you walk around town. This will lead to people telling you again and again that you can’t be approved for this or that. Even if you do get approved for something your interest rates will be ridiculous and you will regret the moment you were late on your student loan payments.

How To Redeem Your Credit And Student Loan

Face it that you have a problem and you need a little mental AA or maybe CSA (Credit Stinks Anonymous) to help you out of this nadir you are in. Start by going right to the root of your problems, the defaulted student loan. Contact your lender and let them know how sorry you are and I am sure you have plenty of excuses, but they won’t matter because you should have told them a while ago when you had the chance for forbearance or deferment.

Just admit you totally blew that one and you are willing to do what it takes to get out of your situation. Most likely they will say fine just let us slap you on the hand a little and come back to us. You can make a few $50 on-time payments and then six on-time payments for the student loan in a row and then this should make a big difference.

You will be out of the default stage and your credit will start seeing the light of day again. This will take some time, but lenders for student loans tend to be more forgiving and they will offer forbearance or deferment in the future even after the default. Now if this happens again then you could be in some serious trouble and you can forget about good credit or another lender looking at you. Take this as a learning experience and never let it happen again.

Many of you face student loans from different lenders and with different payment plans. Whatever situation you may be in with student loan debt, all debtors have one thing in common. That one thing is that they need to pay the loan back.

To give you a bit of an idea what will happen if you don’t pay the loan back we can take a look at some of the steps toward credit hell. I give these to you so you can make sure you know when things are looking bad.

A Bill

First you start off with getting a bill in the mail. This is a simple reminder and the first area where you need to just pay it off. You should not go past this part really ever. If you need to set up a automatic debt repayment plan.

Delinquency Letters

This is the next annoying step that will haunt you. They will probably accompanied by phone calls to remind you that the whole process of paying that debt back wasn’t just some joke that your lender made up.

Final Notice/Default Claim

Eventually after five or six months you will receive a final notice and your bank will tell you to pay your loans back or they will file a claim against you for not making payments. This is where it just is getting ridiculous. Now they are going to contact a guaranty agency that will go after you hard until you pay back this loan or catch up on payments.

Often they will get so strict that they will want the whole money back now, but that will be hard when you are a struggling graduate with little income and thousands to pay back. You will have to contact them and beg for some forgiveness. I would come up with some very good excuses at this point.

Bye Bye Credit

Besides the government reaching out into your paychecks and taking a bite out of it, if you don’t pay back the guaranty company then you can expect them to contact the national credit bureaus and inform them of your lackluster payment history. If this happens then you can forget about a house, car, cell phone, furniture, and other areas where credit is looked at. Basically you better have a lot of cash or start looking to pay some serious dues for several years to get back in the good graces of the credit bureaus. Just don’t let it get to this and always stay in contact with your lender.

Repayment Options

Well we have established that it gets pretty ugly if you don’t pay your loans back in time. Now I know that many of you are in different financial situations so we are going to take a look at some methods to pay this loan back in a timely manner and more importantly save your credit score from crashing like stock market.

Standard Payments

The fastest way to pay off your student loan is through the standard payment. This will allow you to pay back the loan in about a decade. What is nice is that as your income increases you can always pay off more faster and fight off the interest and make a good hit at the principal amount. This will obviously save you more money and help you to get this past you a lot sooner.

Income-Based Payments

This is a payment form for people that are working in seasonal jobs like selling for a company during a summer or really doing sales of any kind. You are going to have great weeks and poor weeks. This is basically a scale based on your income to take out more when you make more. This can be good if your checks are not very consistent and you are concerned about paying off all of the other bills you may have.

Graduated Payments

This is a gradual increase for students that have to climb the corporate ladder to get ahead. This will happen with many of you where you will have to pay your dues and build a good history with a company to move into a position where you are making the salary you want to support your lifestyle. This would require probably 15-30 years to pay off depending on how quick you caught on with a company.

Long-Term Payments

This is for those of you that look to get a job that doesn’t pay well or maybe you just have a lot of bills as it. Basically it means that your income is not that much different each month from the money you send out. Use this as a last options because this could take a good 30 years to pay off and you shouldn’t really have to look at this as an option even though it has the lowest rates, you will have to pay a lot more down the road because of the time it takes to accumulate so much interest.