subject: How to get a Student Loan with One in Default [print this page] How to get a Student Loan with One in Default
Defaulting on a student loan will cause serious problems for you. The government can use a variety of methods to collect payment on the loan. One of the most expensive and embarrassing practices is when they contact your employer about your debt. They will demand that your employer withholds money from your paycheck and pays them. This is called administrative wage garnishment. It is completely legal and it can be devastating for you. Another popular way for the government to recover their money is to keep all of your tax refunds until the loan is paid in full. Oftentimes they will use both methods at the same time. Another problem a defaulted student loan creates for borrowers is that you are unable to qualify to further student loans. If you plan on continuing your education you have a serious roadblock in front of you. Repayment program or pay it off completely Just like any other lender, the bottom line is the government wants their money back. In order to qualify for subsequent student loans you must rehabilitate your defaulted loan or pay the balance in full. Make a payment arrangement directly with the Department of Education. Once you've made six voluntary payments in six months' time you are given the chance to borrow again. You are in good standing after twelve months of paying on time! The government will report the previously defaulted loan to the credit bureaus. The status on the account will read, "Pays as agreed." You must continue to pay the loan on time at the amount you agreed to. Your credit score and a student loan in default Exactly how one negative item will affect your credit score is somewhat of a mystery and has been the subject of much criticism of the three main credit bureaus. How a defaulted student loan on your credit report affects your credit score will differ from how it affects your neighbor's credit score. We do know this: Your credit score is taking a huge hit with a defaulted student loan on your report. Follow the steps above to rehabilitate your student loan whether you want another student loan or not! There are a number of terrible consequences of having a student loan in default. A bad credit score is just one of them. Call a credit repair attorney or service. They can advise you on how to best improve your credit score and get that loan in good standing. The quicker you make the call the quicker you can go back to school.
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