I defaulted on my student loans

I defaulted on my student loans! What should I do now!?

If you’ve recently defaulted on your student loans, don’t panic, you are not alone.  Every year more and more Americans are defaulting on their student loans, with no significant drop in these numbers in sight any time soon.  That is not to say that you should simply forget about your loan troubles; there are steps that you can take to ensure that you don’t find yourself in an even worse situation.

First things first, get in touch with a federal loan representative or case worker either via phone, email or chat.  Next, discuss your current options and work toward hammering out a deal with your loan representative.  It is important that you get in touch with them and handle things as soon as possible because their alternative collection methods are somewhat harsh.  These methods might include everything from paycheck withholding’s, unemployment benefit withholding’s, extremely negative credit ratings, in addition to tax refund withholding’s.  While there are laws set up to protect unemployed individuals from having their benefits cut, in some cases it may be allowed. It should be noted that you should avoid simply transferring your debt onto a private loan repayment program through a third party.  Whenever third parties become involved the interest rates are usually much higher than those offered by the federal government and they also tend to not be as understanding or patient as the government is either.  In all actuality, the act of transferring multiple indebted loans onto another account is simply a credit default swap and is not a sensible long term solution for dealing with your debt.

When calculating your proposed monthly student loan repayment amount the most prudent thing to do is gather all regular, current budgetary considerations and study them carefully.  Most individuals might stop right there, choosing their repayment amount based on immediate and past budgetary documentation; however, it might be best to take a minute and consider any possible future expenditures.  These might include things like potential dental costs, automotive / home maintenance, and so on.  In fact, if you’re putting your budget under a microscope in order to facilitate paying back loans, you might want to begin setting up a little savings account on the side as well (if you haven’t done so already).  When you contact the collection agency or federal loan officer to offer up your debt repayment proposal amount they will most likely agree and ask that you forward signed documentation to them.  However, it is possible that they might also disagree with your proposed amount; in this case you should inform them of your legal right under law to arrange a reasonable and affordable repayment plan.

It should also be noted that inability to effectively deal with your defaulted student loans situation will only lead to even more fees being tacked on to the total amount owed.  What does all of this add up to?  If you don’t take proper action and deal with this loan issue head on, you may be looking at bankruptcy, and / or a severely diminished quality of life standard.  Luckily, there is a simple solution here; correct the problem and work toward crafting a reasonable repayment schedule that works for all involved parties.  If this is not done ASAP, your future credit history, financial stability, purchasing power, and ability to make money will be put into serious jeopardy.