Thousands of students and former students default on their student loans each year. Unfortunately, doing so can have some detrimental effects on a person’s credit and more. For some individuals, there is no way to avoid defaulting on student loans, but the majority of people can take various measures to keep their loans in good standing. Lending companies aren’t completely unsympathetic, so here are some ways to avoid defaulting on a student loan.
Apply for an income-based repayment plan.
Income-based repayment plans are great for people who can’t repay their loans because they make too little money to support themselves. With this plan, a person’s payments get scaled to their income, which will significantly reduce monthly payments. Most individuals will find that they can now more easily pay their loans and avoid a default. On the other hand, a person who makes more money could be out of luck.
Borrow money from a friend or relative if necessary.
Loans come with interest no matter what, but that doesn’t always apply for loans from friends or family members. So then, it is possible to borrow money from someone else to pay off student loans. Some people won’t charge a friend or relative interest as long as they are repaid in a timely manner. This arrangement is much better than getting charge hundreds of dollars in interest each year and having trouble paying back student loans. Of course, anyone that tries this must pay back their friend or relative.
Go to community college as a full-time student.
Loans go into a deferment period when a loan holder is in school full-time. Of course, current students that aren’t full-time students can simply take an extra couple classes at a community college. This is a cost-effective measure to get loans deferred for a few extra months or however long. Community college courses usually cost very little per unit, so anybody should be able to use this method. Sure, it might be harder for people who need to work a lot to pay bills and eat, but online classes make this method even easier.
Consolidate, Defer, or Cancel the loans.
Consolidating student loans puts all loans into one big one so that a person has one payment each month on a gigantic loan. In the end, it could cost more in interest, but the monthly payments will be drastically reduced. Also, there are various ways to get a loan deferment, whether a person is a full-time student or has some other valid necessity for one. Deferments can last for a few months or a few years, depending upon the circumstances. Finally, loan cancellations are much harder to obtain. A person must be under some super financial hardship or meet the requirements through some other means.
Reduce your costs elsewhere.
One of the best ways to avoid defaulting on a loan is to decrease costs elsewhere. Obviously, this is very possible because people spend extra money all the time. Individuals can reduce their utility bills, cancel cable bills, go out less, and more. A great option for students is to simply move back in with their parents or find a cheaper place to live. Undoubtedly, the smallest thing can help a person have more money to pay off their loans to avoid a default.
Talk to the loan company.
In the end, the only option a student or other person might have is to talk to the loan company. Loan companies won’t cancel a person’s debt for no reason, but they can provide a person with various options. Different repayment plans, deferred payments, and extended loan terms are just a few of the tools a loan company can provide to an individual. Obviously, that’s a lot better than an actual default. Loan companies will help people with student loans out because they want to receive their money without using debt collectors or the courts.
Avoid defaulting at all costs!
A defaulted loan can lead to wage garnishment, a ruined credit history, and even bankruptcy. However, bankruptcy won’t always cancel student loans. Therefore, a person with student loans should do all that they can to avoid a default. Various solutions and options are available to student loan holders if they are willing to seek them out or ask for them. Loan defaults are not an inevitability, especially on student loans.
For more information, visit Defaulting on Student Loans.