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  • 3m.

    How Will Federal Student Loan Default Affect You?

    Federal student loans 270 days or more past due will default. If you're facing this situation, act fast to avoid expensive consequences like collection costs, wage garnishment, and tax refund seizure.
    Updated: July 21, 2016

    What You'll Learn

    • When loans enter default.
    • What happens if you don't pay.
    • When collection costs get added to a defaulted loan.

    Man working at a desk

    When you borrow a student loan, you sign an agreement promising to repay the amount you borrowed plus interest. If you fail to do this (or fail to meet other terms within your loan agreement), your loan can enter default.

    Federal Direct and FFELP loans generally enter default if monthly payments are more than 270 days past due. Private loans and some federal student loans may have different time frames for default.

    If you're struggling to make your loan payments, you're not alone. This is a common problem that you can overcome. The worst thing you can do is ignore your loans and hope they go away. They won't, and the situation can only get tougher the longer you wait to take action.

    Act Fast

    Default's consequences kick in quick. In default, your entire balance is due immediately, and the consequences include:

    In addition, a defaulted student loan is one of the worst entries for your credit report. It can lead to:

    • Your interest rates rising on existing loans and credit cards.
    • Having to pay more for car or home insurance.
    • Being unable to obtain or renew a professional license.

    Be Money Smart

    Collection costs can be added to your balance within 60 days to 90 days after your loan defaults. The exact percentage charged will vary depending on your lender, but it's generally at least 16% of your loan balance, and can be as high as 25%. You may be able to avoid these collection costs if you enter into a repayment agreement within 60 days of receiving the default notice. If you can’t do that, at least pay what you can to decrease the collections costs.

    If your balance is $30,000 when you default, your costs would be $7,500. If you chip in just $250 a month during those 60 days, you'll knock those costs down to $7,375. That saved $125 may not seem like much—but if you're dealing with default, any little bit helps.

    Recovering From Default

    If your loans go into default, you have options that can help you recover. Doing these may help you avoid some of default's consequences, as well as allowing you to use the different repayment options available for federal student loans.

    Borrowers can remove a loan from default in three separate ways:

    • Paying the debt in full.
    • Rehabilitation.
    • Consolidation.

    Each option comes with different costs and its own pros and cons. There isn't a right or wrong choice. Putting your loan back in good standing is a positive—no matter how you do it. Go with whichever method works best for you. To get started, contact your loan holder. If you aren't sure who that is, you can look it up in the National Student Loan Data System (NSLDS®).

    How you can get a private student loan out of default isn't as clear as for federal student loans—but you can still do it. Again, start by talking to your loan holder as soon as you can about your options for fixing the default.

    ¿Cómo te afecta el incumplimiento de pago de un préstamo estudiantil federal?

    Los préstamos estudiantiles federales con 270 días o más de vencimiento se consideran en incumplimiento de pago. Otros tipos de préstamos estudiantiles puede ser considerados en incumplimiento de pago incluso antes de ese plazo. Es importante comprender en qué te afecta el incumplimiento de pago.
    Actualizado: 21 julio 2016

    Lo que aprenderás

    • Cuándo un préstamo entra en incumplimiento de pago
    • Qué pasa si no pagas
    • Cuándo los costos de cobro son agregados a un préstamo en incumplimiento de pago

    Man working at a desk

    Actúa rápido

    Las consecuencias por el incumplimiento de pago aparecen rápidamente. En incumplimiento de pago, la totalidad de tu saldo vence inmediatamente y las consecuencias no están limitadas a disminuir tu puntaje crediticio. Entre las consecuencias se incluyen:

    Además, un préstamo estudiantil con incumplimiento de pago es uno de los peores registros que puede tener tu informe de crédito. Puede ocasionar:

    • Un incremento en las tasas de interés de tus préstamos y tarjetas de crédito existentes.
    • Tener que pagar más por los seguros de la casa o el auto.
    • Imposibilidad de renovar u obtener una licencia profesional.

    Sé más inteligente respecto al dinero

    Los cargos de cobro pueden ser agregados a tu saldo en un lapso de 60 días después de que tu préstamo resulta en incumplimiento de pago. El porcentaje cobrado varía dependiendo de tu prestamista, pero por lo general es de al menos un 18% del saldo de tu préstamo, y puede llegar a ser tan alto como un 25%.

    Reduce el monto pagando lo más que puedas durante ese período de 60 días.

    Si tu saldo es de $30,000 cuando comienza el incumplimiento de pago, tus costos serían de $7,500 (más o menos lo que cuesta un buen auto usado). Si le juntas tan solo $250 al mes durante esos 60 días, bajarás los costos a $7,375. Esos $125 pueden no parecer mucho, pero cualquier cifra mínima ayuda si estás lidiando con un incumplimiento de pago.

    Puedes recuperarte del incumplimiento de pago. Esto te salvará de la mayoría de estas amargas consecuencias y te permitirá ser elegible de nuevo para las opciones de devolución disponibles para los préstamos estudiantiles federales.{6]

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