How to Handle Defaulted Student Loans

How to Handle Defaulted Student Loans

Defaulting on student loans can have serious consequences, including damage to your credit score and wage garnishment. But if you find yourself in this difficult situation, there are steps you can take to handle your defaulted student loans.

Assess your situation

The first step in handling defaulted student loans is to assess your situation. Determine which loans are in default and who your loan servicers are. This information can be found on the National Student Loan Data System (NSLDS) website. Knowing this information will help you understand your options and make a plan for repayment.

Consider loan consolidation or rehabilitation

If you have multiple federal student loans that are in default, you may want to consider consolidating them into one loan. This will allow you to make one monthly payment instead of multiple payments to different loan servicers. Another option is loan rehabilitation, which involves making nine on-time, consecutive, and affordable payments to get your loans out of default. Both of these options have pros and cons, so it’s important to carefully weigh them before making a decision.

Explore loan forgiveness programs

If you have federal student loans, you may be eligible for loan forgiveness programs such as Public Service Loan Forgiveness (PSLF). This program forgives the remaining balance on your loans after you have made 120 qualifying monthly payments while working full-time for a qualifying employer. Other loan forgiveness programs are available for teachers, healthcare professionals, and those in the military.

Consider income-driven repayment plans

If you are struggling to make your monthly student loan payments, you may want to consider enrolling in an income-driven repayment (IDR) plan. These plans base your monthly payment on your income and family size, making it more affordable. After 20 or 25 years of payments, any remaining balance will be forgiven.

Communicate with your loan servicer

It’s important to maintain open communication with your loan servicer throughout the process of handling your defaulted student loans. They can provide valuable information and assistance to help you get back on track with your payments. If you are facing financial hardship, let your loan servicer know as they may be able to offer you forbearance or deferment options.

Consider seeking help from a professional

If you feel overwhelmed by your defaulted student loans, consider seeking help from a professional. There are organizations and companies that specialize in student loan debt who can offer guidance and assistance in finding the best solution for your situation.

Stay on track with payments

Once you have a plan in place for handling your defaulted student loans, it’s important to stay on track with your payments. Making on-time and consistent payments is crucial in getting your loans out of default and improving your credit score.

Overall, defaulting on student loans can be a challenging and stressful experience. However, by assessing your situation, exploring options, and staying in communication with your loan servicer, you can take steps to handle your defaulted student loans and get back on track towards financial stability. Remember to always stay informed and seek help when needed.