If you’re one of the millions of twenty-somethings who’s graduated with tens of thousands of dollars in student debt, paying off your student loans may seem like a near-impossible task. With such a seemingly insurmountable amount of debt to your name, it could be tempting just to ignore it altogether.
But failing to make your loan payments can have serious consequences to your credit and your financial security. It also puts you at risk of going into default. Default means that you failed to make your scheduled loan payments according to the terms of your loan promissory note.
Defaulting on your loans can mean a world of trouble: your school, lender or even the federal government can take action to collect the money that you owe. You could also lose eligibility for certain loan repayment options and federal student aid in the future.
So how do you avoid or deal with student loan default?
How to avoid default if you’re struggling with your student loans
Repaying your loans on-time is the first step to avoiding default. However, if you’re already having issues making your minimum payments or you are already in default with your loans, you should start the communication process.
If you’re having trouble making payments on a loan, immediately contact your loan servicer or lender. Speaking with your lender is a critical step in avoiding default, as your lender may be able to rework the terms of your loan to help you meet your payment requirements. If you’re having trouble making payments specifically on a Federal Perkins Loan, you should contact the school where you received your loan.
How to deal with default
If you have already defaulted on any of your student loans, you should contact your loan servicer or the agency that’s billing you. Start the conversation by explaining your financial situation and ask about any options available to you to get out of default. Always stay in touch with your lender or the collection agency while you’re in default and repaying your debt and be aware of any change in loan terms.
If you believe that your loan has been placed in default by mistake, you should contact your lender to ensure that your payments are being processed properly and your lender is aware of any deferment or forbearance status on your loans.