Did your student loans come out of deferment and you didn’t realize it? Missing even one payment puts you at risk of defaulting on your student loan. Defaulting on your student loan can have some serious implications to your credit. However, there are a few things you can do to avoid any more damage.
Below are three options for getting your loan out of default:
- Full Loan Repayment
One option to get out of default on your student loan is to repay your student loan in full. Most people cannot afford to pay the entire balance of their loan but if you are one of the lucky few then you should do this as soon as possible.
- Loan Rehabilitation
Under a loan rehabilitation agreement, you must make nine monthly payments within 20 days of the due date, and make them during a period of ten consecutive months. Your loan servicer can work with you and help you come up with a reasonable and affordable payment plan that is feasible.
- Loan Consolidation
Consolidating your defaulted federal student loan allows you to pay off one or more loans with a single new loan with a fixed interest rate. To do so, you must agree to repay the Direct Consolidation Loan under an income-driven repayment plan or make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before you consolidate it.
There are pros and cons to each of the options. Be sure to do your research so you can choose the one that’s right for you!
Beware of scams
Use caution, though. If you are contacted by someone offering to consolidate your loans for a fee, you’re not dealing with a true US Department of Education consolidation service. US Department of Education consolidation services are free of charge. There are no application fees. There are a lot of student loan scams out there so be sure you are dealing with your loan servicer and a reputable consolidation service approved by the Department of Education before signing any documents. Also, there is no quick fix to your credit. This is a scam if someone offers to fix your credit for a fee.
Your credit score may take a hit if you miss payments on your student loan. To rebuild your credit, it’s imperative that you start making payments on-time as soon as possible. It will be a slow process, but one that is worth it in the long run. Be sure that you are checking your credit report regularly so you can find any errors or mistakes on your credit report and get them fixed.
Defaulting on your student loans is a serious financial event. Take it seriously and be proactive. Call your loan servicer and find out what your options so you can get out of default as quickly as possible. If you need help figuring out what to do or what the best option is for YOU, contact an NFCC certified student loan counselor today. They can walk you through the process and answer any questions you may have.
About the Author: Courtney Nagle is the Digital and Social Media Specialist at the National Foundation for Credit Counseling (NFCC).