#consolidate student loans
Consolidate Defaulted Student Loans
When students sign student loan paperwork, they agree to repay the amount they re given within a specific period of time. Students usually have every intention of paying their loans back, however, some students find that they simply can t pay back their loans in the manner outlined in their agreements. If these students miss a specified number of payments, their loan is placed into default, and this could lead to catastrophe. Sometimes, defaulted private student loan consolidation can help get these students back on track.
Rising Tide of Problems
While student loan defaults were once relatively rare, a difficult economy and a tight job market can keep some students from getting good jobs after graduation, making default a little more likely. According to the Department of Education. the federal student loan default rate in 2013 was as high as the rate once seen in 1995, and there s no end in sight. The number of students who default on their private loans might be yet higher, especially since these loans tend to be more expensive.
Students and graduates who default are often handed over to collection agencies that have no qualms about using aggressive techniques to get the money they want. They ll call endlessly, send letters and even garnish wages, just to ensure that the debt is paid. All of these tactics can make life stressful for a student. In addition, going through the default process could ruin a student s chances of obtaining a good job in the future, as an article produced by CBS suggests that half of employers check applicants’ credit scores before offering them employment. If a student is in default, that student might have such low credit scores that good jobs just seem to disappear.
Defaults rarely sneak up on debtors. Most students know when they ll be unable to meet their financial obligations, and they spend multiple sleepless nights wondering what they should do about the situation. This is the point at which students should act. Calling the lender directly with concerns about the payment can sometimes trigger a consolidation loan, and since the student isn t yet in default, that loan might come with favorable terms. The student s credit is still good, so the loan seems reasonable to the bank.
Once the default is in place, consolidating a federal loan may be more difficult. Students who go this route should expect to:
- See a higher interest rate
- Pay fees for the development of the loan, or fees due to collection
- Adhere to an aggressive payment schedule
- See a ding on their credit report
The rules that govern defaulted private student loan consolidation are similar to those seen in federal student loans in default. Again, the student will likely need to find a private bank willing to accept the loan, and they might still be expected to pay a little more. In the private market, however, students might also be required to use a cosigner for the transaction.
It s always preferable to communicate with the lender and come up with solutions prior to the default. Students who do this won t face such steep penalties, and they ll keep their credit scores from falling. But, when this isn t an option, consolidating those defaulted loans may be the only way a student can meet those financial obligations.