 Almost every college students say, "Goodbye, cool world" on graduation day. Students know that they have to say hello to the real and cruel world, a place where bills start appearing for mortgages, autos, and, of course, student loans.
Even if you're not gainfully employed, or you stopped taking classes prior to graduation, student loans are due. Your loan will be in default, if you don't make a payment for 270 days. If that happens, you'll quickly learn how cold and cruel the real world can be.
Fail to pay the price
If you don't have forbearance (only requires payment of the interest on a loan) or deferment (delay of payment for a specified time) and fail to make a loan payment, you face rather terrible consequences. A lender may turn your loan over to a collection agency, and you'll be responsible for the costs of collecting the loan, including attorney's fees.
It is not the end. Your wages can be garnished, you can also be sued, and your lender can take your federal and state income tax refund. The government can also deny you access to any more federal aid and withhold any Social Security payments that you're currently receiving.
You must understand that all this will wreak havoc on your credit score, which impacts your ability to get loans and access credit.
Preventing and emerging from default
The most obvious way to stay out of default is to make your payments on time. Inform your lender about any address changes that you have. Contact your lender immediately if you can't make your loan payment. You can request forbearance, deferment, or some other payment arrangement.
It's not the end of the world if you do fall into default. It is possible to get out of it by making 9 of 10 consecutive payments within 20 days of the due date. Some negotiation with your lender is required to make these payments may. During negotiations a "reasonable and affordable" payment amount is set. This is known as "loan rehabilitation." Your lender may suggest you to consolidate your delinquent loan.
If you've made six consecutive on-time payments you may also be eligible for additional Title IV federal aid. The results of loan default can be severe and have a significant long-term impact on your finances. It will wreak havoc on your credit score, even though you can climb out of the jam by making a series of payments on time. Select a healthier economic path: Try to make your payments on time and stay out of default in the first place. It's a good way to ensure that the real world welcomes you with open arms.
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