Updated: Oct 8, 2019
We all know defaulting on a student loan can lead to damaged credit score, suspension of professional licenses, and even garnishment of wages.
When I defaulted on a private student loan I thought my professional and financial life was over.
Truth be told if I knew about the options that were available and was more proactive I have avoided default.
Each type of student loan carries a different default period. Some start from the first missed payment while others like federal student loans can take up to nine months of no payment to be classified as default.
Here are 3 ways in which you can prevent student loan default and maintain a better credit score:
1. Reach out to your lender
Reach out to your lender if you’re facing difficulties in making your payments. See what options they offer borrowers who are faced with financial hardships.
You may be able to consolidate, rehabilitate, refinance, or get a forbearance, all of which can help you to not default on your loan.
2. Take advantage of forbearance periods
Student loan forbearance allows you to pause payments or lower your monthly payments temporarily.
You can qualify for one of three types of student loan forbearance:
General forbearance if you’re facing financial difficulties such as an unforeseen medical expense
Mandatory forbearance based on whether you qualify such as serving in the AmeriCorps or you’re in a medical residency
Administrative forbearance if you’re in the process of restructuring your student loan payments by applying for a specific federal benefit or program
3. Request an adjustment in repayment terms
If you’re on a federal student loan program, ask about their income-driven repayment plan. Here, you can pay what you can afford based on your income.
Just remember that you need to recertify your income-driven student loan repayment plan annually. This must be done whether or not your circumstances have changed.
You’re not the only one facing hardships in repaying your student loan. You have options just like the rest of us.
So, try one or more of these suggestions so that you don’t default on your student loan.