“Default” is a dirty word in the student loan industry. If a borrower defaults on a student loan, its bad news all around; the borrower is having trouble keeping up with payments, and now the loan servicer is taking steps to pursue the loan. In many cases, this leads to several legal consequences that hurt the student borrower, including permanent damage to credit ratings and court litigation.
You defaulted on your student loan. Now what?
Falling behind on student loan payments is not the end of the world. It’s not ideal (pesky interest rates!), but there’s a way forward. The same is true with student loan default: you have missed several payments, and the loan company has taken notice.
What Happens If You Don’t Fix A Defaulted Loan
Put simply, bad things happen in the short term, and very bad things happen in the long term. Before a student loan goes into default, it is flagged as delinquent – this happens on the very first day that you miss a payment. After 90 days of loan delinquency, credit bureaus will lower the borrower’s credit score.
Delinquent student loans put you at risk for the following:
- Difficulty obtaining car loans and home loans
- Inability to open credit cards
- Trouble securing homeowner insurance and utilizes
If a delinquent loan goes into default, things go from bad to worse. Student borrowers with low credit ratings tend to pay higher interest rates than borrowers with higher credit ratings. Delinquent and defaulted student loans end up costing you more, and that’s why you need to do everything you can to avoid them!
You think the loan default is a mistake. How can you fix it?
Again, get in touch with your loan company! Because the loan company receives payments on your loan and is responsible for helping you manage your student loan repayment, they should have the necessary documentation. It’s not impossible for a loan company to make an error – but it’s up to you to take the first step and get the loan servicer to straighten it out!
Student loans defaults can occur by mistake for many reasons, such as:
- Missing student loan forbearance eligibility information
- Incorrect in-school deferment records on file
- Missing payment credits on the loan
Don’t Face the Loan Company Alone – Get Assistance
Student loan default is a serious matter that deserves immediate attention. You need to get in touch with your loan company as soon as possible, but you don’t have to take action unprepared. Connect with a student loan counselor and get down to the specifics of student loan default – call 1-844-311-1699!