Clearly, the best way to avoid a student loan default is one of two ways, firstly, either take a loan out which is always going to be well within your means or secondly, make sure that you keep up your repayments each month, on time, every month. These two steps will meant that you don’t have a problem. So, that’s easy, isn’t it?
Well, of course that would be easy for everyone if that was the way it always worked. Yet still some manage to get themselves into a student loan default fix. So for these folks, who are, for one reason or another (and often not of their own doing), unable to manage their budgets, let’s take a look at what the options are.
There are, of course, some occasions when it is simply impossible to avoid getting in a mess and there are special arrangements to help those who find themselves in a student loan default situation, which is worrying and upsetting.
In the US, most states provide a special payback method for affected students that is much less than that of any other type of loan. For example with home loan arrears, or those for auto loans and other personal loans, especially when unsecured. So it’s worth searching around for what is on offer, rather than get into a student loan default crisis.
An even better option that a lot of students are unaware of, is something called the ‘student loan deferral program’. This is a great program which enables a longer payment grace period than normal, especially when there are severe financial difficulties.
It can also be used in any quite unexpected and impactful situation that might have caused a significant disruption.
In any situation where a student loan default is looming, the very first step must be to contact your lender upfront. They will be far easier to work with, if they know them what’s going on, particularly when you go to them with some sort of plan, or options, to get back on track.
They are often found to be very understanding – after all, if they help out constructively, they are much more likely to get their money back, even if it takes a bit longer.
In addition, they will avoid any tricky publicity that might be generated if the press got hold of one of their ‘big, bad lender’ threatens, ‘small, helpless borrower’, sort of stories!
The most important issue for to realize here is that however hard it is in the short-term, having no student loan default record on file will be much easier in all sorts of ways financial in the future.
So seeking out help early on, whatever feelings of fear, embarrassment or worry there are, it will be a really good move.
We all have financial challenges over the years. Being smart about finding how to avoid a student loan default whilst still young, could well be the best finance deal anyone ever makes.