Staying Above Water: How to Avoid Defaulting on Your Student Loans

Student loans are supposed to support everyone in getting the higher education they deserve. And while they do help keep students enrolled, their monthly payments stifle graduates from living comfortably. According to a paper by the Roosevelt Insitute called “The Student Debt Crisis, Labor Market Credentialization, and Racial Inequality,” the median debt had increased from $10,000 in 1990 to over $20,000 in 2018. Another study also found that over 17% of borrowers  These rising costs have prevented people from saving up to buy a home or even start a family.

Dire Consequences

People who miss their payments get tagged as delinquent and take major hits to their credit scores, further preventing them from borrowing large amounts to purchase a home or a vehicle. Those who stay delinquent for 270 days or more get their loans defaulted. Over 40% of borrowers are expected to default by 2023. It comes with heavy consequences, finance magazine Forbes says, in an article called “The Growing Culture Of Student Loan Defaulters Fighting The System with Strategic Default.” One of them is when a court issues to take a fraction of your current paycheck to pay for your loan, which may be disputed with the help of a wage garnishment attorney. If you’re struggling to pay your student debt, consider these tips to avoid getting defaulted.

Ask for a Due Date Change

If you feel like you have enough for your monthly payments, but the due date is clumped up with other bills; ask your lender to change it to a more convenient day for you. If your student loan servicer doesn’t allow payment date changes, request your credit card or auto loan lender in Salt Lake City to adjust theirs. This way, you spread out your bills throughout the month, and you won’t get automatically broke during payday.

Get an Income-Based Repayment Plan

One of the best ways to soften the blow of your student loan is by getting an income-based repayment plan. It allows you to set your loan payment amount according to your income and family size. This takes 10% off your income after taxes, and the repayment period is 25 years. The Federal Student Aid arm of the U.S. Department of Education says that the remaining loan balance you have after the repayment period is forgiven. However, the monthly payment you’ll make for the IBR must be under the usual amount you’re paying for your standard loan. If it goes over, then you may not qualify.

Get It Consolidated

When your monthly payments leave you utterly strapped for cash, try to get it consolidated. This lets you combine various federal loans into a single one. It lowers your monthly dues by extending your payment by a couple of years. It may lead to higher interest rates, but at least you’ll have more control over your income. To apply for consolidation, gather all your documents related to your student loan and go to studentloan.gov’s “Complete Consolidation Application and Promissory Note” and complete the form. Once you submit it, go about your usual payments until you get a response from your lender for confirmation that your attempt was successful. Student loans can be brutal for most graduates, especially if they haven’t racked up the experience for a high-paying job just yet. They face dire consequences if they default, from getting their tax credit stripped to having their monthly income slashed by the government. Follow the tips above, and you may stand a fighting chance against the overwhelming tide of student debt.