How to get back on track after defaulting your student loans
Updated on March 21, 2020
Student loan debt is an ongoing issue in the US as tuition fees continue to rise. With more than $1.6 trillion in outstanding student loan debt, it’s no secret that some graduates are going to have a hard time repaying their student loans.
According to recent research, there is a high chance that 40% of graduates who borrowed in 2004 will default their student loans by 2023. If you’re one of these students that are in default, you may be wondering what’s next.
Unfortunately, student loan default results in financial repercussions such as lower credit scores and wage garnishment. Luckily, you can get back on track after default by following these steps.
1. Catch up on missing and late payments
At times, you can miss or make a late payment on your federal student loan when you aren’t aware of your repayment schedules. However, missing a student loan payment by one day makes you delinquent. Thus, it’s vital to find ways to make your missing payments as soon as possible.
Additionally, ensure you are aware of the timelines of your repayment and how much you are required to pay.
2. Decide on loan forbearance or deferment
If you are in a tight financial situation, catching up with your missing or late payments is not a viable option. Instead, apply for loan forbearance or deferment depending on your financial situation. However, it’s essential to carefully look at your deferment and forbearance terms since additional fees can be added to your loan.
3. Prepare your finances
Preparation is vital when it comes to paying back your student loans, especially if you’re in default. Now more than ever, you need to prepare your finances to ensure you don’t miss any payments and make consistent payments over a set period.
For example, you can start by making a few changes to your lifestyle, like eating out less and moving in with your parents temporarily. This allocates more money in your budget to your federal student loan.
At StudentLoanify, we can help you get back on track after a student loan default. Contact us today to find reasonable student loan repayment plans that fit your needs.