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There may come a time during your loan repayment that you experience difficulty making your monthly loan payment.  The last thing you want to do is skip payments.  This will cause your loan status to be reported as delinquent which has negative implications for your credit history.  If you become delinquent for an extended period of time, you will default on your loan, which has more severe negative consequences.  If you are having trouble, you have some options:

  1. Speak to your loan servicer about changing repayment plans.  By switching to a plan that provides a lower monthly payment, that payment may be more manageable.
  2. If you need to postpone making payments and meet certain conditions, you may qualify for a deferment. During deferment, any subsidized loan you have will not accrue interest.  To see if you meet the conditions for deferment click here.  Also speak to your loan servicer to see if you qualify.
  3. If you do not qualify for deferment, but still need to postpone making payments, you can make a request to your loan servicer to put your loans into forbearance.  Be aware that interest accrues on your loans while in forbearance status.

With all of the different options available, avoiding default is easy.  Because the consequences of defaulting are so severe, you want to make sure you take the appropriate steps to avoid it completely.  Some of the consequences include:

  • The entire outstanding balance is immediately due.
  • Your wages can be garnished.
  • Your credit rating is negatively affected.
  • Your federal and state tax refunds can be seized.
  • Amount of debt will increase due to late fees, additional interest, court costs, and collection fees.
  • The loan holder can take legal action and you could have liens placed on your assets.
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