What Happens if I Default on My College Loan?

Whether your student loans were federally funded or secured from a private entity, the repayment process is long, difficult, and expensive. Neither federal nor private loans are currently dischargeable in bankruptcy. Sometimes, due to circumstances beyond your control, you are forced into student loan default. What are your options at that time?

Student Loan Default Help

The failure to make monthly student loan payments means the loan has gone into default because you have failed to comply with the initial agreement. Although a defaulted student loan can lead to serious credit problems, there are ways you can recover from your default and rebuild your credit. The key, however, is to quickly enter into a recovery plan to minimize the long-term credit damage.

By refinancing, consolidating, or entering into repayment plans with your lender, you can eventually repay the remainder of your student loans. In choosing a method to resolve the default, the three most relevant factors are:

  • the source of the funding (federal or private),
  • the number of loans involved,
  • and the amount owed.

In a situation with both government and private loans, dual repayment plans may be necessary.

Consolidation of a Private Student Loan

What you’ll need to apply:

  • Name of your alma mater
  • Current amount of private student loan debt
  • Name, address, phone number and email
  • Social security number
  • Drivers license number

Click here to: Apply for Consolidation of a Private Student Loan!

Loan Refinancing

If you have defaulted on only one or two private student loans, loan refinancing may be difficult to obtain. Federally funded student loans cannot be refinanced by a private institution. In refinancing, a new lending institution pays off the existing loan with interest, and you are then obligated to pay the new lender according to the agreed upon terms of the refinance. Your interest rate will likely increase, as the fact of the loan default raises your risk profile with the bank. However, you can likely reduce the payments by extending the life of the loan or by getting a qualified cosigner for the loan.

Loan Consolidation Programs

In the consolidation process, you negotiate an agreement with a new lender, who then pays off the multiple loans. All future payments go to the new, single lender at the agreed upon rate.
Loan consolidation is an option for both federal and private loans and allows multiple loans to be merged into a single debt with one monthly payment and one rate of interest (please note that federal and private student loans cannot be combined into a single consolidation loan). This can significantly reduce the monthly amount of debt repayment, particularly if a qualified cosigner is added to the loan.

Repayment Plans

If you choose neither to refinance nor to enter into a consolidation program, you may be able to arrange a repayment plan with your lender. Repayment plans generally use garnishment and tax refund suspension. For federal loans, garnishment is the primary tool for payment, but, in the event of a lawsuit, garnishment can also be used for private student loans.

Essentially, as a term of the repayment process, a portion of your paycheck each month is “garnished” or deducted with that amount going to your lender to resolve your debt. In cases of federal loans, the government may also seize any tax refunds due the debt holder and apply those toward the student loan amount owed. This may also be a voluntary arrangement negotiated with the government if the borrower’s income is insufficient to repay the loan.

Consolidate Your Private Student Loan – Today!

Cedar Ed Private Student Loan Consolidation enables recent graduates to lower their private student loan rates and monthly expenses into one manageable payment. They give you the option to:

  • Consolidate $7,500 – $125,000 in undergraduate private student loan debt ($7,500 – $175,000 for graduate).
  • Recent rates for approved loans range from 4.75%-7.25% (see application page for more details).
  • Take advantage of a 15-year repayment term with no pre-payment penalties.
  • Interest-Only Repayment Option up to 4 years for eligible borrowers.
  • Cosigner release available after 12 consecutive on-time principal & interest payments.
  • Reliable, steady income of at least $2,000 gross per month.

What you’ll need to apply:

  • Name of your alma mater
  • Current amount of private student loan debt
  • Name, address, phone number and email
  • Social security number
  • Drivers license number

Also you need a *Cosigner if you do not have:

  • Steady reliable income
  • If your annual income is less than your requested loan amount, you most likely will not be eligible by yourself for the Private Student Loan Consolidation.

*Note: a creditworthy cosigner can increase the chances of getting approved and often will lead to lower rates for the borrower.

Click here to: Consolidate Your Private Student Loan – Today!