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Defaulting On A Student Loan
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Article on Defaulting On A Student Loan
Defaulting on a student loan is a serious and risky business, and something that can seriously jeopardize the future of anyone who does so. In fact, the federal government does not take this matter lightly, and there can be serious repercussions.
What is Student Loan Default?
If the student loan has gone more than 270 days without a payment, it is considered to be in default. Skipping a scheduled payment on the loan is considered to be a serious matter and there can be heavy penalties attached by the lender, which is usually the federal government. The fines can be hefty, and the outcome does not bode well for anyone who is thinking about defaulting on a student loan.
Damage to the Credit Report
One of the first things to consider is the long term damage that defaulting on a student loan can do to the credit report. A student loan that has not been paid will result in a negative report that can stay on the record for years. This will have a disastrous effect when applying for any other type of loan, such as a vehicle purchase or a home. The financial lender will look at the credit report and see that the loan has gone into default, and any hopes of obtaining financing for just about anything will go right out the window.
Penalties
The federal government will not be happy with anyone who neglects to pay back a student loan as agreed. They may very well decide to garnish the wages and take a percentage of each weekly paycheck to pay the loan. This all happens before the paycheck ever reaches the recipient. Income tax refunds can also be withheld until the loan is paid in full, and any other monies that are earned, or even won, can be taken as payment. Keep this in mind if there ever is a time that you may consider defaulting on a student loan.
Professional Problems
For those students who have attended college to earn a professional degree or license, the licensing can be withheld if the loan is in default. This applies to any type of professional license, whether it is a cosmetology license, real estate, or medical. Transcripts are also blocked during the default, and this can often result in potential job loss. The college where the degree was earned is prevented from releasing the transcripts to any other requesting institution until the loan default issue is resolved. These are very serious consequences and should never be considered to be less.
There are many options available to prevent defaulting on a student loan. A lending institution may be able to consolidate the student loan by lending money to pay off the student loan in question. The payments may even be lower than before, and spread out over a longer time frame. Don’t ignore that fact defaulting on a student loan is very serious, indeed. Ask for assistance if this has happened, or is about to happen. Contact the lender to see what options are available to rectify the problem before it becomes a major issue.
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