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What Does Defaulting on Student Loans Mean for Me?

With so many young graduates leaving college with tens of thousands of dollars worth of debt, it’s no surprise that many find themselves facing serious financial burdens. Those who do not immediately find jobs or who get laid off due to a still lagging economy often get behind on payments.

These graduates find themselves in an impossible situation. They have no way to pay for the loans, yet the consequences start to pile up immediately. Even just falling a few days behind on student loans will put your loan into delinquency. After 90 days of delinquency, the payment issue will be reported to the three credit bureaus and your credit score will take a big hit. After just 270 days, the loan is officially in default.

Consequences of Defaulting on Student Loans

Defaulting on student loans may not seem like a big deal, but it carries serious consequences. If you default on your student loans, you face the following repercussions:

  • Lowered Credit Score: As mentioned before, the first consequence you experience for late student loan payment is a lowered credit score. This can increase your interest rates and affect your eligibility for new loans in the future. It can even affect your employability in certain cases.
  • Loss of Eligibility for Loan Forgiveness Plans: Default on student loans makes you ineligible for the programs that will help you the most, including federal forgiveness programs, forbearance, deferment, and alternative repayment plans.
  • Loss of Government Benefits: Up to 15 percent of your benefits from the government can be taken as a means of paying off your student loans, including disability or social security.
  • Collections Calls and Fees: When your loans go into default, they are turned over to a collections agency. Not only will you be hounded for payment, but you will also ultimately face higher debt due to the collections fees that get tacked onto your loan.
  • Wage Garnishment: Your loan payments can be taken directly from your paycheck through wage garnishment. Not only will this eliminate up to 15 percent of your income, but it can also be difficult and embarrassing to explain to your employer.
  • Tax Refund Offsets: If your loan is in default, the amount you owe in late payments can be deducted from your tax refund. If you were depending on that money, it can really hurt your financial health.
  • Lawsuits and Other Legal Actions: If you are in default for an extended period of time or the collections agency is unsuccessful in collecting payment, you can be sued for the amount you owe. There may be serious (and expensive) legal repercussions of this outcome.

As you can see, the consequences of student loan default are not to be taken lightly. It may feel like there is nothing you can do to prevent or get out of default, but you do have options.

If you are falling behind on student loan payments or simply are overwhelmed by debt, contact an Ohio consumer debt lawyer to discuss your options today. You may be able to work our an alternative payments plan or get a temporary forbearance. Your financial situation may even be help by filing for bankruptcy in certain circumstances. No matter what, though, it is important to deal with student loan delinquency or default as soon as possible.

The longer you ignore the problem, the bigger it gets and the fewer options you have to resolve it. Call the consumer debt attorneys at Cleveland Bankruptcy Attorneys at today for a free consultation on your legal options for student debt. We will show you all your options and help you decide on the best one for you.

Overwhelmed by Student Debt? Contact Us Today.

Whether you’re deep in debt or struggling to stay up with bills, there’s a solution to your financial situation. We have the knowledge and experience to fight for your best interest. Contact Cleveland Bankruptcy Attorneys today to discuss your options at (216) 369-6715.

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