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Student Loans in Default Consequences and Tips to Get Out

With the rising cost of college tuition along with lowering job prospects, it isn’t surprising that more and more people have difficulty paying off their student loans. There has been a marked increase in student loans in default since 2008 and the figures of defaulted student loans have risen for more than $80,000 from last year.

Delinquency and default

Failure in making your loan payments when they are due leads into delinquency. A delinquency period starts on the first day after you miss to make your loan payment. During the first 15 days you will receive at least one collection letter or written notice from your loan lender. After your student loans have been in delinquency for nine months (270 days), your loan holder will declare your loans in default (for the largest portion of private student loans this period is three months). In case you have trouble in making payments, it is strongly advised to contact your lenders as soon as possible, as they may have some special “default aversion” programs to help you during delinquency or you can negotiate with them to postpone your payments to help you find the solution for the problem. The most important thing is to contact your loan holder as soon as you receive their notice. Avoiding doing this can lead into deeper financial troubles and some of the student loans in default consequences are the following:

  • Damaged credit record
  • Cancellation of Federal Student Financial Aid eligibility
  • Restriction of Federal benefits like Social Security retirement benefits and Social Security disability benefits, but not Supplemental Security Income
  • Garnishments of your wages (up to 15% of your income)
  • Cancellation of certain repayment benefits
  • Extra fees and interest that are added to the original loan amount
  • Possibility of going to court
  • Cutting off of Tax Return
  • Loss of professional license.

Federal Student Loans in Default

Federal student loans offered by the US Department of Education such as Stafford Loans, Perkins Loans or PLUS Loans provide up to nine months grace period after graduation which is intended to help you find job or some other source of financing to begin repaying your student loans. In addition, federal student loans offer various repayment plans that are designated to meet different needs of the borrowers as well as student loan consolidation option. However, there is a large number of Federal student loans in default. After you have defaulted on your Federal student loan, the government goes for your wages garnishment without the court order and can independently take up to 15% of your paycheck because Federal student loans are not discharged in bankruptcy proceedings (except in limited circumstances).

Federal student Loans – Getting Out of Default

There are a few things that you can do to get yourself out of default. You have the option to:

  • consolidate your loans
  • rehabilitate your loans or
  • renew your loan eligibility.

Federal Student Loans Consolidation

Student loans consolidation option allows you to replace several loans like Stafford Loans, Perkins Loans or PLUS Loans with just one and to repay all loans with this one at lower interest rates and for extended period of time. Once you consolidate your loans your loan will be out of default. In addition, you will be able to get income sensitive repayment plans, you will no longer get collection calls, you will be eligible for deferments and forbearance, and you will be eligible for new loans.

Student Loans Rehabilitation

Rehabilitation can call off negative consequences of student loans in default. This program involves several steps. First, an officer from default Collections will arrange a monthly repayment plan for you and you will have to agree with the monthly payment sum required to participate in rehabilitation program. You have to make at least nine on-time loan repayments to qualify. After completing of rehabilitation agreement, the underwriter transfers the loan to the loan servicer and your loan is considered to be out default. Furthermore, you will be able to apply for deferment and forbearance as long as these haven’t been exhausted during the period your loan was in default.

Renewing Student Loans Eligibility

You can apply for new loans even though you are in default, but you have to work up your default status before that. First thing you should to is to call your loan lender and make a repayment agreement. After that you must keep up with payments and after six consecutive monthly payments you will reestablish your eligibility and be able to receive new student loans and grants.

Note: You must apply for any of these options to happen.

Private Student Loans in Default

With private student loans you do not have the advantage of a nine months period in case you miss payments on your private student loan. You should bear into mind that if you are a private student loan borrower, your loan will usually go into default as soon as you miss the payment, although some private loan lenders offer three months period before declaring your loan defaulted. This default period will be outlined in your loan contract. Therefore, you should carefully review your private student loan contract to learn what are your rights and obligations related to the loan. For the wage garnishment in case of private student loans, the lender must get a court order and the rules governing this sort of garnishment vary from state to state.

Private Student Loans – Getting Out of Default

There are fewer options for getting out of default for private loan borrowers like Sallie Mae or Wells Fargo than for people who have default on their federal loans. One of available alternatives is forbearance, which means that the borrower only has to make interest payments for a period of time approved by the lender. Although this may provide some temporary relief, it actually increases the sum you have to pay back, since the principal remains the same and the interest continues to accrue.

Being into default does not have necessarily negatively to affect your finances, career or life. All you have to is not to panic but to take the first steps in the direction toward solution of your problem. Contact your loan servicer and ask for assistance. Loan forbearance, consolidation or rehabilitation program may help you to get out of default.

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How to Refinance Student Loans – The Easy Way

Many people who go to college end up using student loans to finance at least a portion of their education costs. Although getting a higher education can be expensive, student loans help ease the pain a little bit. These loans are typically given at low interest rates and are generally easy to get regardless of your credit history. Once you have these student loans, you may want to refinance them so that you can take advantage of lower market interest rates. When it comes to refinancing student loans, there are a few things for you to consider before jumping on board with this strategy.

How it Works

The basic idea behind student loan refinancing is that you pay off your existing loan by taking out a new loan. For example, in this scenario, you would borrow money from a new source. You would then take that money and use it to pay off your existing student loans. At that point, you’re left with the new loan at a new interest rate and with a new payment.

Why Refinance?

If you’ve never refinance the loan, you may be wondering what advantage there is in going through this process. The primary reason that people refinance their student loans is so they can get a lower monthly payment. If you have several student loans at higher interest rates and market interest rates are lower, refinancing can provide you with a lower monthly payment to work with. This will make it easier for you to afford your bills and give you more money to use as you wish.

Another reason that some people want to refinance is so that they can pay less money in interest overall. If you refinance your loan at a lower interest rate, you will not be paying as much money in interest each month. If you keep paying the same amount every month, this will make it so that you are paying more money toward the debt and less in the form of interest charges to a lender. This makes it possible to pay off your debt faster. It also can provide you with some peace of mind knowing that you’re not just throwing extra money away every month in the form of extra interest.

How to Refinance

When it comes to refinancing, there are plenty of ways that you could go about it. Sometimes, you could simply talk to your existing student loan lender and see about refinancing your loans into a new loan. If you have multiple loans, you may have the option of consolidating your loans into a single package. In many cases, this can make it so that you get a lower interest rate and a lower payment.

If you have Federal student loans, you can also get to the United States Department of Education’s website and search for loan refinance programs. In many cases, you can also work with your local bank or credit union to facilitate a refinance of your student loans.

When you find a lender to work with, you will need to fill out a loan application. This loan application will typically ask for information about your personal situation such as your name, Social Security number, address and phone number. In addition to providing this basic personal information, you will also have to provide information about your employment situation and your income.

At that point, the lender will evaluate your loan application to determine if you qualify for a new loan. If you qualify for a new loan, you will then be able to refinance your existing student loans and start enjoying the savings.

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Medical School Loans To Finance Your Medical Education

With the baby boomer generation getting older, the need for medical services is at an all-time high and still growing. Because of this need, doctors and other medical professionals are in high demand. If you are looking for a good career for the future, getting involved in the medical field is definitely a safe bet. However, the process of getting there can be time-consuming and expensive. In order to help you pay for college, you may need to take out medical school loans.

Types of Medical Student Loans

When it comes to getting medical school loans, there are two different types of loans that you could use. The first type of loan is a federal student loan. Federal student loans will help you go through regular undergraduate college and help you pay for your doctorate degree courses. These loans are need-based and are not necessarily dependent on your credit or your income.

If you do not have much money and your parents do not have many assets either, you may be able to qualify for subsidized federal student loans. With these federal student loans, you don’t have to pay the interest while you are in school. In fact, the federal government actually pays the interest for you while you are still in school. This helps you keep your debt at a more manageable level while you are still taking classes.

Another type of medical school loan that you may be able to qualify for is a private loan. Private student loans are issued by lenders such as Sallie Mae and Citi Finance. These loans do depend on your credit and your income level. These loans are not backed by the federal government and they come with higher interest rates and payments. In many cases, you have to at least make the interest payments while you are in school. You can apply for medical educational private student loan with no cosigner or co-borrower but need to have sufficient strong credit profile and no bad credit.

Student Loan Debt

One of the problems with student loans is that they lead to a large amount of debt for students. This is especially true for individuals who choose to pursue a career in the medical field. In many cases, if you try to become a doctor, you might spend up to 12 years in school after high school. This means that you’re going to rack up some pretty big debt along the way.

Because of this growing problem, many people are looking for ways to get help. There are debates going on in the federal government about whether they should forgive some of the principal of these loans so that MD students can have a better financial situation.

One of the advantages of being in the medical profession is that you can get some of your student loans forgiven. If you work in a rural area that is understaffed with medical professionals, you may be able to get a large portion of your debts forgiven by the lender.

Consolidation

Another issue that many people in the medical profession have is that they have multiple student loans. This can be difficult to keep up with because you have multiple payment due dates and interest rates. In this situation, one option that you have is student loan consolidation. When you consolidate your loans, you can only do this once. At that point, you have to pay off the loan. You can typically choose one of many different payment plans. Some are based on making even payments over the life of the loan. Others are based on your income while some use a graduated repayment plan. School loans lenders are generally flexible when it comes to repay your debt, but you won’t be able to get out of repaying it.

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