While organizing a mountain of debt might seem like an uphill battle, you have some advantages. Your federal student loans can be easily located if you forget one or two. You have more possible payment plans to make your loans affordable within your budget, options for temporary payment reprieves, and ways to recover financially from late or missed payments than nearly any other kind of loan.
Default Rehab
You were just turned down for a mortgage, and you don’t understand why. You’ve maintained steady employment for the last five years, you pay all of your bills on time, and the required down payment is sitting in your bank account. When you ask the banker what happened, you are told you defaulted (failed to pay) on a student loan. It doesn’t make sense to you because you’re shelling out hundreds of dollars every month to your student loan servicers.
What happened? Odds are you forgot about one of your student loans and it went into default. This is fairly common. In a ten-year study conducted by the National Center for Education Statistics that followed the graduating class of 1993, 20 percent of those who had at least $15,000 in Stafford Loans had defaulted on at least one of their education loans. Others, including myself, thought they were making payments on all their loans but misplaced information on one loan and ended up in default.
We were further saddled with penalties in addition to seemingly neverending interest. If payments had been organized, this never would have happened. That’s why it is crucial to stay organized and up to date on your student loans, and repair a default situation as quickly as possible. When you look at your chart, pay attention to any loans that are in default status and the ones you forgot about that could go into default status. After all, if you can catch them before the default is official, you can contact your servicer and start making payments before you have to go through default rehab.
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