An average individual in an American household usually pays for his own education and does that with either with a loan or, if he is lucky enough then through a scholarship. Of course, in a scholarship the student does not have to pay back the scholarship provider for the grant. The competition for scholarships is fierce and therefore a huge number of students end up with the option of taking a student loan for the purpose. Also a scholarship does not pay for other student needs like housing for instance.



The assumption a student makes is that once he graduates and gets a job, repayment is not too difficult. All this seems fine until he encounter certain road blocks.

One of them is dropping out of college. There is no written rule that having taken a loan a student ensures that he completes his education. Somewhere down the line he may discover that he does not like the course much. Or he realizes he is better off doing something else. In such circumstances while the education is suspended or stopped, the loan continues.

Or take the high rate of interest that most lenders charge. Federal loans cost less in comparison but again the payments have to be regularly cleared. Added to this, there maybe several other student expenses not covered by the loan that a student needs to manage.

And we are not talking yet about other valid reasons like illness and personal factors that may cause a disruption of payments.

Even in normal circumstances a student may end up graduating with a degree in one hand and a loan on his mind. The repayment of the loan may stretch up to 20 of the best years of his life.

So what happen when a student defaults on his loan? Even before that happens, something can be done to help.

As soon as you as a student become aware that you are in danger of defaulting on the payment, contact the lender and request for a deferment or forebearance. What happens here is that your lender may choose to then to postpone the repayment of the principal for a determined period, at the end of which it reverts to the original repayment status. For certain federal loans you can take a break for a period that would be almost half the school time. You can even be exempted from the interest being accrued for this period as the federal government pays the same. This is however not applicable to other loans. Deferments are subject to the discretion of the lender and applicable in some specific circumstances.

A request for forebearance only allows you postpone or to reduce your payments but the interest continues to add up, which has to be paid during this period. Here again, there are specific conditions that you have to fulfill as determined by the lender.

So what happens if you do not exercise these options and default? You may risk having to deal with debt collectors knocking on your door. And to add to the woe the lender will charge you their service fees as well!

Along with this, you risk being taken to court for the entire amount of your loan. As a student you definitely do not want to get on the wrong side of the law.

And of course your credit ratings will plummet, something which may not mean much as a student but which will throw up unnecessary complications at a later date.

You would definitely not be happy when your bad credit record may actually make it difficult for you when seeking employment. Your applications for home or car loans can well be rejected and that's not what you will like for sure. If you want to get a credit card sometime in the future, even that may be difficult to have. If you thought it can't get worse than this, well, you can bid good bye to any deferment you need in the future and years later you my even have difficulty renewing your professional licence.

All in all, taking a student loan may ease your education expenses but if mismanaged will saddle you with a burden too hard and too long to bear.