When Student Loans are in Default - There are Options

Student loan default is a growing problem in the U.S. today. As much as a quarter of all student loan borrowers are one to two months behind on their monthly payment according to the Consumer Financial Protection Bureau. 

Add to that millions of federal student loan borrowers have already defaulted on their loans.

A lack of jobs is one of the reasons for this happening. The unemployment rate for college students that have recently graduated is more than twice that of the regular workforce. 

Because of this, one-third of college students under age 25 have jobs that do not use their recently acquired degree.

Over the past decade, student debt has grown to an average of over $22,000 for graduates of public colleges and universities and over $28,000 for private school grads. 

That’s a 20% increase. A growing number of borrowers – greater than one in eight – have debts of $50,000 or more. For too many, this grim economic reality makes making each loan payment in-full and on-time a monthly struggle.

Student Loan Debt Collection

These college students, who are in default, do not realize there can be thousands of dollars of fees and penalties they are liable to pay. 

Their credit will be damaged for many years to come and it will keep them from acquiring new debt like consumer loans, car loans, and mortgages. They have no choice but to refinance student loan programs and take control of their student loans.

The worse part they do not realize is that even through bankruptcy you can not discharge a student loan. The debt you have acquired will be with you until you pay it off.

The only good point to being in default is you cannot qualify for income-based repayment, an alternative payment plan can have a monthly payment as low as zero for extremely low income borrowers.

If you’ve fallen behind on your loans, check out the new web tool, available on ConsumerFinance.gov and at the new StudentAid.gov, launched by the U.S. Department of Education.