Tuesday, April 24, 2012, AM | 1 Comment
Are you planning to go for higher studies? Have you already applied for a student loan? Then, it is time that you make a loan repayment plan. If you think you have time enough, you are wrong. If you do not plan now, your loan repayment can become very difficult.
If you miss even a single payment, your loan will gain a defaulted status which will lead to a bad credit score. As a student, this is the last thing you want.
What happens if I do not repay?
When you take a student loan, you have to pay it back simply because there is no way around it. The federal laws are very strong about this and non-payment of loan can lead to the most unpleasant situations.
Your loan can either become either delinquent or defaulted. If the loan is not repaid, the credit score takes a plunge. It can only be improved with regular repayments.
A bad credit score can prevent you from receiving any financial assistance in the future and also from getting a credit card. Your salary may also be garnished and social security benefits withheld, if your loan is not settled.
Also, if your parents co-sign your loan, their assets could be in danger. Therefore, the best idea is to repay the loan.
What is a delinquent student loan?
If you take a federal student loan, the loan will gain a delinquent status if you miss even one payment. A delinquent student loan will remain so for the next 270 days or 9 months.
It is like a warning period when you will receive several reminders about your outstanding student loan. But this is not the case with a private student loan which will become defaulted if you miss even one payment.
What is the best way out?
The best solution is to plan ahead. Also try to begin the repayments even before your course ends. That way your burden will be reduced once you begin your job.
Remember, that a student loan is there to help you meet the expenses and not to enable you to live a lavish life. So do not borrow any more than you need because at the end of the day it is you who has to repay it.
Once you start earning, you will have to meet several other expenses. It will be better if you can keep the loan amount lower than your expected salary.