Education is not cheap. Student loans are a significant financial burden that a lot of young Americans are forced to carry. To make matters worse, it comes at a time when most of us are still struggling to make sense out of adulthood. Hence, it is really not a big surprise why a lot of our readers want to know what happens when you don’t pay a student loan.
In this article, we seek to answer that question for you as well as share some tips on how to make student loan repayment easier.
So, what happens when you don’t pay student loans?
- The loan is going to be tagged as delinquent. Just missing a day of payment will already lead to your account getting tagged as delinquent. It will stay that way until you eventually catch up with your payments.
- You will be paying more in late fees. One of the biggest consequences of neglecting to pay your student loans is the late payment fees. With the principal loan and the interest rates, they can really stack up before you know it.
- You will be reported to the credit bureau. Delinquent federal student loan accounts are typically reported to the credit bureau after 90 days past due. On the other hand, delinquent private student loan accounts can be recorded as early as just a month past due.
- You’ll get a poor credit score. A student loan that has not been paid for a while will enter default. This will then significantly impact your credit score that can affect your future loans, business contracts, and even job prospects.
- And more. Once your student loan has entered default, another slew of consequences including payment garnishments, loss of eligibility when it comes to receiving financial aid, or worse, there’s even a threat of getting arrested.
People react differently to having their student loans reach the default point. Some feel anxious while others, curiously relieved. Regardless, you must never disregard its seriousness. As we have mentioned, a myriad of consequences awaits those who neglect their student loan. Fortunately, there are a lot of ways to manage your finances and make student loan repayment faster.
How to Pay Off Your Student Loans Faster
Strategize a Plan
Create a realistic budget that accounts for all of your expenses, including other payables like your student loan. This will help you determine whether your inflow is enough to cover your outflow and make adjustments when necessary.
Take Advantage of Alternative Methods of Buying Your Needs
Building your own life from scratch can be quite costly if you’re planning to buy everything brand new. Hence, try to consider alternatives such as getting hand-me-downs from family and friends, buying secondhand, or
taking advantage of point-of-need financing.
Pay More Than the Minimum Payment
Once you have figured out your finances and have determined that you have enough to cover more than the minimum payment, then there’s no hurt in paying more. It doesn’t have to be double the amount of your student loan. Even $20 more each month will already work towards getting your debt paid faster.
Get Another Source of Income
It will be easier to repay any loan if you have the money to do so. There are a lot of ways to make extra money.
We highly recommend freelancing. You can easily squeeze these short-term projects into your hectic schedule. There are a lot of gigs to choose from such as data entry, graphic design, and content writing just to name a few. We also like that these projects are fairly easy to accomplish remotely. You mostly just need a computer and a reliable internet connection and you’re all set.
If you’d rather work for yourself, then another way to make money online is to establish your own business. You can own a shop or be a social media influencer. There are a lot of opportunities to earn online these days. The good news is, some of them cost nothing at all to start.
Find the Right Job
Did you know that there are jobs that offer student loan forgiveness and assistance programs? Those who are interested in getting a job in public service can qualify for a public service loan forgiveness (PSLF). It allows those who have federal loans forgiven tax-free as long as they work full-time for a qualifying nonprofit or government agency for a specific number of years.
Meanwhile, there are private companies that offer their employees student loan assistance as part of their benefits. You can also try negotiating this benefit to be a part of your compensation package.
Consider Refinancing
Finally, you may also consider refinancing your current student loan. We highly recommend this to those who have already established a good credit score and thus would want to enjoy lower interest rates.
In relation to the previous tip, though, please keep in mind that you might lose your eligibility to apply for a student loan forgiveness or assistance program after getting your loan refinanced.
Conclusion
There are a number of consequences that await anyone who would choose to neglect their student debt repayment. These could include having a poor credit score, limited job opportunities, and even the risk of getting arrested.
Fortunately, there are a lot of ways to get your student loan repaid faster. We have simply featured the ones we have already tried and tested but there are certainly other methods you can explore. Good luck!
Martha Pearson
Guest Blogger
Martha Pearson is Editor-in-Chief for Finturf. She provides financial and business management analysis for retailers and service providers..
Share
Recent Posts
Quatromoney
-1920w.png)