The term student loan has become a household word with the young graduates. It has now become a necessity if you are planning to go for higher education or to enroll in any professional course. It is true that they help you improve your skill set. But they are also quite heavy on the pocket. In order to handle the enormous course fee, we have to go for an educational loan. These loans if not planned properly can become defaulted in no time. So even before you take a loan, plan the repayment.
If you miss even a single payment on your loan, it becomes defaulted. In the case of a federal student loan, the beneficiary is given a delinquency period of 270 days or 9 months. During this period you will be sent warnings about the status of your loan.
Defaulted student loans can lead to severe consequences.
Bad Credit Score: A bad credit score can prevent you from getting any financial support in the future. Your application for a credit card may also be rejected. Your social security benefits may also be stopped.
Garnishment of Wages: The lender can get a permission to garnish your salary and make up the money you owe. As a result, a major portion of your salary goes away like this.
Embarrassment: Financial institutions pass on the defaulted loans to the collection agencies. They use various means to make you pay. They may call you at your home or your work-place. They may even call your friends and relatives and this creates a really embarrassing situation.
In order to avoid all these situations, you must make arrangements for the payment of the loan. Prevention is better than cure. But it is not possible to finance the entire higher education by oneself. So, the next best option is to keep the loan amount as low as possible. Always keep in mind that a student loan is for meeting the expenses of education only. Another good idea would be to keep the loan amount below your expected salary because at the end of the day it is you who has to pay for it. You can also try and start the repayment on the loan while you are studying. These are some of the measures you can take before your repayment period begins. Unlike the other loans, you do not have the option of filing for bankruptcy. However, if your student loan does become defaulted, there are several avenues to seek assistance from.