Avoiding Trouble with College Loans

One of the primary reasons why people consider college loan consolidation is because they are having trouble with making payments on their college loans. They may be behind by a month or two on some of them, and others may be approaching default. If this is happening to you, you shouldn't be thinking twice about a low-cost consolidation loan because there are serious issues that come up when you default on a private or Federal student loan:

• The entire balance of the loan becomes immediately due and payable if you default.
• The government can garnish your wages, which means that your employer will be legally obligated to take a percentage of your pay out and pay it toward your loan before you even see your check.
• If you receive a tax refund, the IRS will be ordered to take the refund (all of it) and apply it toward your delinquency.
• You will never again be eligible for financial aid - consider this carefully, you may be out of school and finished with your degree, but if you ever have children and want to help them by getting a PLUS loan on their behalf you will be denied.
• Even though you cannot file bankruptcy to get rid of a student loan, it can severely affect your credit for up to 7 years when you default on one.
• If the government has expenses in trying to collect the loan from you, they will be charged to your account along with any other fees and penalties they want.

As you can see, defaulting on your student loan can bring with it steep penalties and severe issues that could follow you around for a long time.

How to Avoid Defaulting on Your College Loan

The first and most important thing you can do to avoid defaulting on a student loan is to talk with the lenders. Disappearing into a hole and refusing to answer the phone or mail that is sent to you will not help the situation at all - you cannot hide from Uncle Sam. Talking with your lender may reveal that you are eligible for deferment of your loan for a period of time until you are better able to meet your obligations, or perhaps they can extend your loan or put you on a better payment schedule that suits your financial situation.

Of course, consolidating your college loans is also a way to avoid defaulting on them. With consolidation, your new lender will make complete and total payments to your college loan lenders, eliminating those obligations and leaving you with one monthly payment to make that will meet your obligation to the new lender. Most college loan consolidation lenders will also let you roll in other debts you may have, such as credit card debt, into the consolidation as well.