Steps to Take When You Default on Your Federal Student Loans
If your federal student loans have finally got the best of you, it may seem like defaulting is your only option.
With student loan debt averaging nearly $30,000 among graduates, it’s understandable why you may be finding it difficult to make your monthly payments. As difficult as it is, allowing yourself to default on your loans will only make the situation worse. Generally, you’re considered to be in default on your federal loans after 270 days of missed payments. Though it’s not recommended to wait until that point, this does mean you have a 9-month delinquency period to contact your lender to find out your options and figure out a new game plan.
But what if you’re already in default and you’re beginning to feel the serious consequences? Here are steps to take after you default on your federal student loans.
Contact Your Lenders
The first step to bringing your loans out of default is to contact your lenders. While they may not be able to offer you a forbearance or temporary halt in payment, they can list your options and help you with your next steps. Your lenders can tell you if your loans have been sold to debt collectors and how much you owe. It can certainly be intimidating and stressful, but making this call is the first step to get the ball rolling.
Participate in a Rehabilitation Program
A rehabilitation program can be a great way for borrowers to get back into good standing with their lenders. In this 9-10 month program, you work with your lender to agree upon an affordable payment plan. Once you have successfully made on-time payments and proven yourself to the lender, your default status will be removed from the loan. This will allow you to continue to work toward paying off the remainder of your balance. Note that your wages may still be garnished while participating in a rehabilitation program.
Consolidate Your Loan
Another option when you default on your federal loans is to consolidate them. Like a rehabilitation program, consolidating your loans can be great option if you commit to pay according to the new plan. After you make on-time consecutive payments for 3 months, your loans can be merged together to form a new loan. As long as you begin paying your outstanding balance, you will no longer be in default.
Get Professional Help
If you feel like these options aren’t enough, you may want to consider seeking professional help. Financial advisors, planners, and lawyers can help you better understand your current financial situation and how to move forward. At Tayne Law Group we know it can be difficult for college grads to handle their rent, bills, and student loans, all while managing to have a social life. That’s why we came up with a Student Loan Debt Help Service designed to help you ease the burden of your loans.
What About My Private Student Loans?
A default on private loans can happen after one missed payment and the consequences can be major. Unlike federal loans, private loans don’t have as many rehabilitation options, if any at all. Contact your lender to see what options are available to you. You may be able to receive a temporary forbearance or payment halt. Consider contacting Tayne Law Group if you’re having trouble with your student loans and want to better understand your options.
With Donald Trump entering the White House at a time where student loans are at their highest, positive changes are hopefully on the horizon. According to Forbes, Trump may be looking to do away with federal student loan programs and move solely to private banks. What this means for the future of student loans is yet to be determined.
Are you struggling to pay off your student loans? What steps did you take to get back on the right track? Feel free to leave your comments below!