Why you should never fall into loan default

If you’re having financial problems, contact your student lender to renegotiate the loan terms.

Defaulting on your student loans can have serious consequences: The government can garnish your wages, withhold your tax return or send a collection agency after you.

Defaulting will mess up your credit rating, making it difficult or impossible to get a car loan or a mortgage. It can also prevent you from getting a job, which is what happened to one Metro reader, whose potential employer ran a credit check and found that $70,000 was owed on a defaulted loan.

You’re not officially in default until you’ve gone nine months without making a monthly payment — but don’t wait till the nine months are up.

“If you’re having financial problems, contact the lender as soon as possible so you can renegotiate the loan terms,” advises Nancy Capoziello, senior associate director of student financial services at Adelphi University. Your lender will usually be willing to work out a new plan, in which both sides agree on an affordable amount for your monthly payment.

You may also be eligible for a deferment or forbearance, both of which allow you to postpone payments. In a deferment, no additional interest accrues while you’re not making payments. During forbearance, interest continues to accrue.

Both of these have specific rules about who qualifies — but you are only eligible for either if you’re not yet in default.

Follow Judy Weightman on Twitter at @JudyWEdu.


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