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Saturday, April 3, 2010

Student Loan Market Struggles in Avoiding Default

Due to many recent defaults on student loans and fluctuations in the market, lenders are projecting lower and lower profits made on student loans. This has caused some lenders to pull out of the student loan market all together. The government has also cut subsidies to student loan lenders giving them less incentive to offer special rates.

This does not mean that you cannot find good rates and good terms on student loans. You may not see as many deals and incentives as you used to, but there are still good loans out there. You may just end up shopping around more than you expected. Use web sites that offer comparisons of terms and rates from many lenders to help bring some clarity to your search.

Once you have your student loan, it is important to follow the rules and avoid defaulting at all costs. Defaulting is a major problem that could be avoided if more people had shopped around before they got into a situation with a loan that may not have been the best fit for their situation. The internet gives us the advantage of sitting at home and doing our own research. Long gone are the days of driving from bank to bank, or just accepting the list of lenders that our school offered.

Avoiding default can be as simple as calling your lender. Ask about repayment programs. Some payments can be figured using your income, meaning that you pay more only when you make more money. Forbearance can be granted or payments can be deferred if you qualify. The trick is that you have to ask. Simply not making a payment is not a wise decision.

Student loans are considered in default after only sixty days. Your loan balance can jump up to more than you originally borrowed. Even bankruptcy does not make all student loans go away. Even worse, the government has the power to collect on many loans. They first go the IRS and take any refunds or credits that you have due. If the balance is not covered by that, then they can garnish your wages. You will have no control over the government getting to your money before you do. They even collect your Social Security benefits or any other government monies that you have coming to you. If they cannot get enough that way, then they can sue you.

Defaulting on student loans is a serious matter and you should take every step possible to avoid it. Make sure that the student loan you select meets your needs. Shop around and make sure that the terms are acceptable before you accept. Ask about special terms such as forbearance, deferments, financial hardships and repayment options. Once you have compared lenders and types of loans online, you will be better equipped to avoid defaulting on your student loans.

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