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Paying Off Defaulted Student Loans

If you have not made your federal Stafford, PLUS or Graduate PLUS loan payment in over 270 days, your student loan will be considered in default. What can you do about this to keep your credit from being ruined?

Having a defaulted Stafford, PLUS or Graduate PLUS loan on your credit report will cost you dearly in the long run. The bad mark will mean higher interest rates and credit denials until it is cleared, a minimum of 7 years. Even if you pay the loan in full it will still be marked as defaulted. There is only one way out of this predicament - loan rehabilitation.

Contact your lender and make arrangements to pay back your student loan and you are on your way to a clean credit report. Your lender wants to get paid, and they know the best way for that to happen is to work with you to come up with a payment you can afford. When you reach a satisfactory repayment agreement with your lender stick to it!

After nine full payments on your defaulted Stafford, PLUS or Graduate PLUS loan made within twenty days of their due dates (twelve full payments for Perkins loans) your loan will be taken out of default status and your credit record will be clean. These must be voluntary payments. Garnishment or other forced payments do not count. As soon as your default status is cleared you will be free to consolidate your loans and lower your payments even more.

While you may be able to consolidate after three consecutive payments your loan will not be taken out of default status. This will be marked on your credit record as "defaulted, paid in full" and still considered a black mark so loan rehabilitation before consolidation is mandatory for a clean credit history.


What happens if you find yourself unable to pay back your student loan?

Rather than ignore the payments, try contacting the student loan officer at your bank and ask about a deferment. A deferment will allow you to put off paying in any of the following circumstances.

Student loans are just as burdensome as any other loan and in some cases students have several loans taken out in order to pay for college. This is where student loan debt consolidation comes in with a plan of consolidating all of an individual's student loans into one manageable loan. You need to get your facts by researching various places before you apply for one of these consolidation loans.

Only certain types of loans can be consolidated under this type of loan and you will need to check. You cannot include loans such as credit cards, loans from family members, or automobile loans in the student loan consolidation.

The obvious benefits to consolidating a student loan are that there will be a single payment, probably a lower payment, and one fixed interest rate. The fixed interest rate is especially attractive because this helps a person set up a budget easier. Of course the drawback to a fixed interest rate in this type of loan is that you may not be able to take advantage of future drops in interest rates if they occur.

Another drawback to student loan debt consolidation is the length of the term. It could be that you end up paying this loan longer than you would have otherwise and in the end pay more total interest. So be careful to get all of the data about your student loan debt consolidation loan before you sign the agreement.

Finally, you need to determine if consolidation is really for you before doing it. It may be that you want to pay off the loan faster as student debt consolidation loans tend to stretch out longer. But for most it is an attractive way to get your payments down and manage your student loan debt
Staying Out of Trouble With Student Loans

Once you graduate and find a job, the reality of paying back your student loans hits. Below are some steps you can take to help keep the payments from causing you heartache.

  • The first rule is to stick to a payment plan.

    Set aside a certain amount every month for your loan payment. Making a larger payment than required each month can help you pay back the loan sooner, thereby saving you a great deal of money on interest. If you think you may forget, set it so the payment is electronically transferred each month.

  • Though interest rates of student loans are low compared to credit cards and other loans, it's still a frustrating reality to deal with. But there is hope, if you're making under $65,000 on your own or less than $130,000 if filing jointly you can deduct up to $2,500 of the yearly interest you're paying on your student loan.

  • If you're simply can't come up with your monthly payment, there are options.
    Since your salary is only going to grow as you climb the corporate ladder, you can schedule graduated repayment plans with your lender.You start with a low monthly payment that will gradually get larger over the term of your loan.

  • If you're absolutely out of options, you might be able to temporarily suspend your payments.

  • If you lose your job or go back to school for an advanced degree, you can request a deferment of your loan payments.

  • If your request is granted and you have a Stafford loan, the government will actually take care of the interest that accrues during your deferment.

  • If you can't get a deferment, try forbearance can suspend payments for up to a year, though you'll still be responsible for the built up interest.

What are Student Loans | Student loans consolidation. | Help I can not paybackmy my student loan

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