Student Loan Consolidation | Can’t Make Your Loan Payments?

Can’t Make Your Loan Payments?

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It happens to the best of us, especially in these tough economic times – you miss a student loan payment, or two. You’re going through a rough patch and now wonder what the consequences may be for your lateness or delinquency.

Well by missing just one payment, you are considered delinquent. So not only will you be hit with late fees, but your non-payment will affect your credit rating (lowering it), making it harder to get a home loan, or finance a car when you want. Furthermore, if you miss your payments for nine months (sometimes less), you are then considered to be in default and that’s when the proverbial you-know-what hits the fan. Your loan might be turned over to a collection agency (more fees), your credit will be shot, you could be taken to court (even more $$) and the government could garnish your wages (up to approximately 10 percent) until the debt is repaid. Wait, there’s more – you won’t get that income tax refund you were counting on and you won’t be receiving any more financial aid – that goes for your kids too.

If you’re in default already, then seek the advice of your lender right away to see if there is a way to get you back to good status. If you are currently struggling to make those student loan payments, then try consulting with your lender to see if they can adjust your repayment plan.

Another way to keep yourself out of default would be to see if you qualify for deferment. Deferment is a temporary reprieve from your loan payments and there is usually a time limit of up to a few years. If your federal loan is subsidized, the government will take care of the interest during the deferment, however if it is unsubsidized, you will have to pay for the interest that accrues even while payments are not made. You should contact your loan servicing center for deferment guidelines. Always continue to make your loan payments until you know that you have been approved for deferral, otherwise you could end up en default. Once you are in default, you are ineligible for deferment.

There is also something else called Forbearance. Forbearance may be good for those people who don’t qualify for deferment but are struggling to make payments because they’re doing an internship, or their payments are greater than 20 percent of their gross monthly income, or other financial hardship. It works like the deferment in that you have to apply for the relief, and must make your loan payments until you know you have been approved.

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