Legally, a default occurs the first time you fail to make a payment when it is due. But if you fail to make your student loan payment for 180 days, your loan will enter the ?official? default status and take on a life of its own. This is the point at which the lender will report your student loan as defaulted to the credit bureaus. It is also the point at which a long list of bad things can start to occur. Your tax refund checks can be seized and your wages can be garnished.
What Happened?
Why are student loans so different from all other debts? Well, prior to 1991 the U.S. Department of Education was empowered to collect delinquent student loans for only six years. But in 1991 an amendment to the Higher U.S. Department of Education Act lifted all time limits for collection. And the amendment was retroactive; student loans that were past the statute of limitation for collection prior to the amendment became collectable again. And to further reinforce the longevity of student loan debt, a 1998 change in federal law made it virtually impossible to discharge student loan debt in a bankruptcy.
The Reason for All This
The theory behind making sure that student loan debt can be collected forever is simple; the cost of student loans can be kept low by minimizing the number of borrowers that don't repay. And since education, and the availability of low cost education loans, is always a political priority, it was not all that difficult to enact these changes.
The Ultimate Collectors
There is simply no way to escape the U.S. Department of Education and their army of private collection agencies that collect on their behalf. In addition, Sallie Mae, the nation's largest student loan lender, has been purchasing collection agencies to track you down. So, what if they find you and you say you have no money? Well, the U.S. Department of Education now has the right to garnish wages, grab your tax refunds, and even seize your Social Security Checks (you read that right!), all without a court order. And, although Sallie Mae does not wield the same powers, they have started to turn over hard cases to the U.S. Department of Education to get the job done. Anyone attempting credit repair must realize that student loans must be dealt with head on, and the sooner the better.
Credit Repair Options
There are two great solutions that are designed to solve all of your student loan problems. Both of these options can stop all collection activity, lower your interest rate and payment, and reinstate your right to borrow more money for school (in case you want to go back to school). There are no qualification requirements and you are not punished for having bad credit. Everyone gets the same low interest rate. These two options are consolidation and rehabilitation. Both are a good fit with any process.
Student Loan Consolidation
Just contact the lender or collector and tell them that you would like to consolidate your defaulted loans. You will be required to make three monthly payments on time. Once you have done this you will qualify for consolidation. If you are attempting credit repair you should note that after consolidation your credit report will be updated to show the consolidated status, but the default notation will remain, like most derogatory information, for seven years. If you are in a rough patch the consolidation program allows for up to three years forbearance. Ask your lender for details. My focus has been on defaulted student loans, but it may be handy to note that you do not need to be in default to enjoy the benefits of consolidation.
Rehabilitation
This is a slightly longer process, but has the extra benefit of removing the default status notation from your credit report. To rehabilitate your loan you need to make nine to twelve consecutive on-time payments (depending on which type of student loan you have). Once you have completed this process your loan is considered ?seasoned? and is sold to a new lender, and the default is wiped off of your credit. Once done, it is like it never happened. If you are attempting you should note that your payment history, including any late payments that you made, will remain, but your credit score will benefit from the removal of the default. Borrowers are allowed to rehabilitate a defaulted student loan one time only. As always, contact your lender to discuss the details.
Copyright ? 2007 James W. Kemish. All Content. All Rights Reserved.
Student loans are more affordable than ever says the Department of Education. In 1987 an undergraduate student who graduated with $8,000 in student loan debt and an interest rate of 9% could expect to pay about $4,200 in interest costs. Student loans are a great tool to ensure more students have access to higher education and are able to fulfill their dreams, however, student loans are serious business and bring with them a responsibility to fulfill the obligations of the loans. Student loans are borrowed money that must be repaid, with interest. When used properly, student loans can be a good resource to assist with college costs.
Student loans are a good investment in your education; however, students should be good consumers when it comes to borrowing by limiting your spending to necessary school related expenses. Student loans are unsecured because Lenders are betting that students will get jobs when they graduate and pay them off. Most loans are expected to be repaid from your income after graduation therefore loans should be viewed as an investment in your education that makes future income possible.
Student loans are considered financial aid because of the special interest rates for which you qualify. Most student loans are subsidized by the federal government' and repayment does not begin until after graduation student loans therefore are generally incurred in good faith; indeed, they are encouraged as wise investments
Student loans are one of the most popular methods used to help pay for college, but sorting out the different types and how they are different can be confusing. Some types of student loans include Stafford loans, Perkins loans, and Plus loans. Student loans are offered to the students to help them financially for their higher or professional studies. They usually carry a low interest rate.
Interest rates and fees on federal student loans will not increase. A far smaller group of students rely on private student loans or other forms of consumer financing like home equity loans. Interest charges and repayment begins nine months after the student graduates, withdraws or drops below half-time status. Repayment can be extended for as long as ten years.
College graduates make over $1,000,000 more on average over their lifetimes than those who stop school after high school. Today, roughly two-thirds of graduates from public universities leave with student loan debts averaging $15,500 per student. College is the greatest time of your life, or so you will be told countless times, as you get ready to enter a new phase of your life. Whether it is as a student fresh out of high school, as a full time worker returning to college for night classes, or a parent of a student, there is no other place quite like college.
Both Jim Kemish & Bennie Perry are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Jim Kemish has sinced written about articles on various topics from College Student Loan, Credit Loans and Free Credit Report Score. Jim Kemish is the president and founder of Power Mortgage, a company based in Delray Beach, Florida. Power Mortgage Corp was established in 1989 and s. Jim Kemish's top article generates over 301000 views. to your Favourites.
Bennie Perry has sinced written about articles on various topics from College Student Loan. Bennie Perry Is Real Estate Broker and credit Counseling Specialist with over 9 years of experience and Hundreds of clients helped. Visit more of his works at. Bennie Perry's top article generates over 18100 views. to your Favourites.