If you’ve defaulted on your student loans and are struggling with Federal wage garnishments or collection agencies, you need help. Fortunately, there are a lot of non-government organizations that specialize in providing the help you need. Unfortunately, not all of them are reputable, and some can do you even greater harm than you already suffer.
How do you find the right company to help you with your defaulted student loan, and avoid the rest? Perform your due diligence—research and ask questions—before you sign any contract or agreement.
First, you want a company that can guarantee—in writing—a fixed lower monthly payment. Be careful here. Some organizations apply variable interest rates to their agreements, which means your monthly payment can change from month to month, and you can bet that change will probably mean a higher payment. Get the interest rate in writing, and make sure that it’s a fixed interest rate.
Next, study your different payment options. A higher monthly payment might be more attractive if it comes with a shorter repayment term. If you need a lower payment, you’ll probably be paying it for a longer period of time. Be clear about how long your payments will run.
Have the company show you where exactly in the contract it lays out their pay-off terms. There may come a day when you’re able to payoff the loan in full in one lump payment. Some companies will penalize you with additional charges for that payoff. Why? If you have signed a 25 year refinancing agreement, your loan servicing company expects to collect a certain amount of interest from you. That’s how it makes its money. If you payoff the loan early, it makes less money.
So, choose a company that does not penalize you for paying the loan off early. In addition, make sure the company allows you to make higher and/or additional payments on the loan whenever you’re able without penalties.
Only agree to a monthly payment that you know you can meet in good times and bad. Base your payment on those months when money has been tight, not on your big income months and not on the hope or anticipation of greater income in the future, like a planned raise or a new job. Plans fall through, hopes often aren’t realized. Your monthly payment must be based on cold hard reality.
Look for a company that helps you through the hard times. If you’re sick or hurt and can’t work, or if your employer lays you off, you may not be able to make your monthly payment. So, make sure the company has programs in place, like a month or two of forbearance, that you can use as needed. (Be clear about the interest rate the company charges for that forbearance.)
Find out what penalties will be assessed if you miss a payment, or only make a partial payment. They could be much worse than those assessed by the Federal loan program.
Make sure you know the worst case scenario. Some companies have contracts that grant them the right to repossess your belongings, from furniture to your car, if you default on their loan.
Finally, remember the Boy Scouts and Be Prepared. Read everything, including all the boring small print. In fact, it’s probably best to hire a lawyer for an hour just to make sure that your contract actually states the terms to which you’ve agreed, no more, and no less.
Many private loan serving/debt consolidation companies that specialize in student loans are reputable, honorable, and safe. By doing a bit of research and asking the right questions, you’ll get the help and guidance you need when you need it most.
Posted in Default Student Loan by .
Millions of student facing problems to pay student loans, what can you?
The U.S. Department of Education today released the official FY 2009 national student loan cohort default rate, which has risen to 8.8 percent, up from 7.0 percent in FY 2008. The cohort default rates increased for all sectors: from 6.0 percent to 7.2 percent for public institutions, from 4.0 percent to 4.6 percent for private institutions, and from 11.6 percent to 15 percent at for-profit schools.
The rates announced today represent a snapshot in time, with the FY 2009 cohort consisting of borrowers whose first loan repayments came due between Oct. 1, 2008, and Sept. 30, 2009, and who defaulted before Sept. 30, 2010. More than 3.6 million borrowers from 5,900 schools entered repayment during this window of time, and more than 320,000 defaulted. Those borrowers who defaulted after the two-year period are not counted as defaulters in this data set.
“These hard economic times have made it even more difficult for student borrowers to repay their loans, and that’s why implementing education reforms and protecting the maximum Pell grant is more important than ever,” said U.S. Secretary of Education Arne Duncan. “We need to ensure that all students are able to access and enroll in quality programs that prepare them for well-paying jobs so they can enter the workforce and compete in our global marketplace.”
Schools with excessive default rates may lose eligibility in one or more federal student aid programs. This year, five schools are subject to sanctions for cohort rates that either exceeded 25 percent for three consecutive years, exceeded 40 percent in the latest year, or both. Four are proprietary schools: Tidewater Technical, Norfolk, Va.; Trend Barber College, Houston, Texas; Missouri School of Barbering & Hairstyling, St. Louis, Mo.; and Sebring Career School, Houston, Texas. The fifth school is a private school: Human Resource Development & Employment – Stanley Technical Institute, Clarksburg, W.Va.
Since the time when the borrowers in the FY 2009 cohort enrolled, the Obama Administration has expanded flexible loan repayment options for borrowers through the income-based repayment plan (IBR). This plan makes loan payments more affordable by capping the monthly payment at an amount based on income and family size. The Department is stepping up its outreach efforts to make sure borrowers are aware of the benefits of IBR.
In addition, the Department has taken several proactive steps to protect students and taxpayers from programs that leave borrowers with large amounts of debt and poor employment prospects. Through a series of regulations finalized over the past year, the Department has tightened loopholes to protect students from misleading or overly aggressive recruiting practices; taken action to ensure that institutions are offering high-quality programs; and established rules that require career college programs to better prepare students for gainful employment or risk losing access to federal student aid.
This summer, the Department released several College Affordability and Transparency Lists to provide students and families with easy-to-understand data about college costs to help them make informed decisions about their choice for higher education. The lists highlight schools with the lowest and highest tuition and fees, their average net price and those institutions whose prices are rising at a particularly fast rate, and they allow students to compare costs at similar types of institutions. In the coming months, the Department will be disclosing additional data, such as the gainful employment measures, as part of President Obama’s ongoing commitment to boost college affordability and accessibility and make government programs more open, transparent and accountable to the American people.
Finally, in recent months several institutions – notably for-profit schools – have taken action to ensure that current and future students are well served. Several institutions have closed underperforming programs, upgraded their curriculum, begun offering free trial periods so students can try out a program before enrolling, raised admission standards, and boosted repayment rates through better loan counseling.
Borrowers who need assistance in repaying their federal student loans can visit http://www.collegedefaultedstudentloan.com/blog or can contact us at 1-877-730-5368.
How to get out of defaulted student loans
…When all else has failed
If you’ve tried to deal with your debt issues through conventional means but are still facing a great number of years of repayment and other hardship(s), you might want to completely reassess your situation. In other words, you might want to seek outside assistance from a debt help specialist or organization.
What would this accomplish? Arguably, one of the foremost reasons as to why someone might seek third party assistance has to be promise of quickly improving their credit score. For some people, the prospect of living frugally for a number of years while debt payment is being undertaken is not an option. Their way around this is to simply leverage their debt repayment schedule around attaining extra credit for even more financing. In other words, they want to be able to live in a nice place and/or drive a nice car while they’re paying back their loans. Financing a lifestyle based on credit is not perhaps the most advisable thing to do, but as long as a comprehensive plan is established and one is extremely stable with repayment(s) there should be no problems. Although your overall loans / total debt will be greater and take a longer amount of time to pay, there is an upside; in the end, you will (hopefully) own something of value.
Well, let’s get back to our original topic; how to get out of defaulted student loans by way of third party loan institutions. In truth, it will probably cost you more in the long run to go with a third party or private institution for repayment of student loans. However, there two distinct reasons as to why it might also be advisable in some cases. Refinancing your loans affords you the opportunity to lock in a much lower monthly payment if would like to do that; however, you should be aware that with an increased interest rate and lower payment, it will be a long time before you’re in the clear. If you are considering this as an option you should also plan on making sizable and infrequent deposits as well, in order to clear out the total amount owed more quickly. What’s the other reason for seeking outside loan assistance? A good third party organization will be able to stop the government from garnishing your wages / benefits, or stealing your tax return; which puts you back in control of your own finances. Having the government basically take money greatly disheartens most individuals, which in turn discourage them as well and takes virtually all the incentive out of going to work and trying to do a good job.
While it’s true that most outside loan assistance programs will end up receiving much more money from you over a longer period of time than the government, there is a reason for this. These outside loan organizations are taking a risk on you, fronting the cash to help you out, getting the government off your back, helping you straighten your life out, and giving you much more control over your personal finances. The trade off for all of this freedom is of course, a higher cost. But during the time that you’re repaying your new loan agreement you might live much better than if you simply toughed it out; either way, you’re still in debt.
Defaulting on a student loan(s) is not an insurmountable problem; sure, it may require some tact and frugality to overcome, but it is more than possible to deal with. As with any other financial matter, the best way of dealing with a problem is to get out there and take care of it as soon as possible. Before you sign anything, you should always understand the implications and read the fine print, however. If you are lacking in this regard it’s probably best to seek the counsel of a trusted and experienced accountant and/or contract lawyer. Good luck.
There are many ways to deal with defaulted student loans. One of the simplest ways to satisfy defaulted student loans is to consolidate all outstanding loans into one lump sum then refinancing that amount under a new interest rate and/or agreement. With this in mind you may ask “Can I consolidate my defaulted student loans”?
A much better question might be; “should you consolidate defaulted student loans” or, “will it work for your particular situation”? An individual’s ability to rehabilitate their defaulted student loan(s) is entirely dependant on two things; their current level of financial fortitude and ability to make regular payments. Despite any assistance that a loan consolidation company might be able to offer, you have to keep in mind; they are in business to make a profit. The simple truth is that they are not going to pay off and appease those seeking your student loan money without expecting something in return. Some loan consolidation organizations might (in fact) use collection tactics that are just as harsh as those practiced by the government.
How does debt consolidation work exactly? Consolidation is to take two or more outstanding loans and refinance them into one. To a person who is swamped with multiple student loans that have come due, loan consolidation is an enticing option. Each of these loans has their own restrictions, limitations as well as terms, agreements and interest rates. In this situation, (where there are multiple interest rates) your long term amount owed might be either higher or lower depending on the specific terms of each loan. So, consolidating can either raise your overall debt ceiling or it can lower it; it all depends on how the compounds over time. When you consolidate your loans, you are essentially gathering them all into one lump sum; all accumulated debt will at that point, will be privy to the new long term interest rate. This is why it is very important that you understand how your proposed loan consolidation agreement works. Some organizations will have a lower interest rate than others; however, they may offer less perks than those with higher interest rates. When you consolidate defaulted student loans, a lending institution pays off your existing balances and replaces them with a new, consolidated loan
What you should be looking for in a loan consolidation company:
● Ability to lock in the lowest possible interest rate
- Assigns a fixed interest rate that is not subject to unexpected changes
- Select a low monthly payment that perfectly suits your budget and lifestyle
- Doesn’t charge fees or penalties for certain unexpected / unforeseen events
- Doesn’t have the power or authority to repossess your possessions as collateral
Be sure to thoroughly read every square inch of your contract / loan agreement before signing. Missing one little clause could mean the difference between you losing or keeping thousands of your hard earned dollars. This is why it’s probably best to get a lawyer or accountant to look things over, just to make sure that you are getting a fair deal; you are after all, paying them thousands of dollars for a long term service. If the details of your loan agreement are satisfactory, then you should feel free to sign. Congratulations, you just effectively dealt with your loan debt issues! Here’s to the future!
