Here’s What You Need To Know About Defaulting On Student Loan Debt

The student loan debt crisis seems to get worse every year, with over a trillion dollars owed in total by tens of millions of millions of borrowers. Every year sees around a million people defaulting on such loans. How did it get to this point and what do you need to know? 

According to the website Make Lemonade, 44 million people owe roughly $1.5 trillion in student loan debt. In 2016, it is estimated that the average student owed $37k, while that number went up to $40k in 2017. The Urban Institute put out a prediction stating that around 40% of loan takers were going to default by 2023. Digging into the statistics reveals some interesting facts about who is able to pay their loans back. It turns out that people who take on debt below $5k are less likely to default than people who have loans in excess of $35k. But what do you do if you, like many grads, have loans you are finding difficult to pay back? Read on to learn about some of your options.

Repayment Plan

Defaulting on your payments isn’t a great solution for anyone. If you default, your credit will be negatively impacted and you will find it hard to take out loans in the future. On top of that, your lenders will get nothing, which they obviously don’t want. Lenders should be able to work with you to come up with a plan for repayment, one way or another. There are government assistance programs which rather than being based on the original loan terms will be based on what you currently owe. This will then drop the amount you have to pay on a monthly basis. 

Deferral

If you can get a deferral, that will give you a break from paying for a while. If you are finding it hard to stay afloat, this is a good idea as it will give you a chance to get back on your feet, and you may even be able to get a deferral where they pause the interest. It may not be a permanent solution, but it will give you a chance to regroup and get your finances in order before you start paying again.

Consolidation

Consolidation comes in handy if you have multiple loans which you are paying back at the same time. By consolidating them, you can turn that into just a single loan, which simplifies the loan repayment process for you. Look for loan consolidation organizations, but do know that you will be stuck with a single interest rate if you do this, and you won’t be able to bring it back down. Definitely don’t take on a consolidated loan unless you know you are comfortable with the interest rate they are offering.