PRIVATE STUDENT LOAN
If you're struggling to pay back a private student loan and are feeling the pressure, here is what happens when you default on a private student loan.
What Happens When You Default On A Private Student Loan Program
Student loan debt is a major problem in the United States. In fact, the average graduate leaves school with over $37,000 in student loan debt. And, of those graduates, 10% will default on their loans within five years.
So, what happens if you default on a private student loan? The consequences can be severe and long-lasting. But, there are steps you can take to get out of default and back on track.
Keep reading to learn more about what happens if you default on a private student loan and what you can do to avoid it.
You’re going to be assessed penalties and fees
You're going to be assessed penalties and fees. Fees and penalties are added to the loan balance, so if you don't make payments on time, they'll apply to your private student loan debt.
Fees and penalties can be as high as the amount of money owed—so if you default on a $10,000 private student loan and owe $12,000 in total, then your lender is legally required by law (and probably ethically obligated) to charge 10% interest daily or weekly until all of their legal obligations are satisfied (which usually takes about six months).
The good news is that these fees won't affect future earnings since they're only charged once per year during tax season-but still take them into consideration when deciding whether or not this particular private student loan makes sense for yourself!
The loan holder can sell your account and the loan to a collection agency
When you’re in default, the loan holder can sell your account and the loan to a collection agency. This can be a scary experience if you don’t know what it means.
Collection agencies are aggressive; they call you at all hours of the day, often using threats and intimidation tactics.
They may call multiple times per day or even send texts that say things like “We will sue you” or “We will take everything from you.”
The worst part about having a private student loan is knowing that these companies have access to so much personal information about us.
our Social Security number, bank account numbers and balances (which are often shared), etc.
but even if we want to change those details online now there's no guarantee that this won't happen again later on down the line.
There’s no statute of limitations on defaulted loans
The statute of limitations is the time limit for collecting on a debt. For example, if you default on your car payment and don't pay it back within 7 years, you can't collect anything from the company that owns your loan (and they'll probably be happy to let you know).
But what happens when someone defaults on their student loans?
The statute of limitations for defaulted student loans is usually 10 years—but some states have extended this period in cases where it makes sense: If someone has been out of school for 30 years and still owes $100K in tuition debt at age 60.
but will likely never repay it because they're unemployed or disabled; or if someone owes thousands but only wants to settle his/her balance with a 10% interest rate rather than taking legal action against him/herself so he/she doesn't have any money left over after lawyers take their cut.
Your credit score will be affected
Your credit score is one of the most important factors in determining whether or not you qualify for a loan. In other words, your lender will consider it when deciding whether or not they want to give you money.
If your credit score is low enough and if there are no other conditions that would make it difficult for them to approve the loan (like being late on rent), then they may be willing to do so—but only if they feel like their own personal risk is low enough too!
It might be harder to get financial aid in the future
If you default on your private student loan, it might be harder to get financial aid in the future. You could be denied financial aid and have to pay back some or all of the money that was originally owed. Even if you don't get any more federal funds because of this delinquency (and many people aren't), your loan will still accrue interest until it's paid off in full—and then there's another fee for late payments!
If this sounds like an insurmountable task for a struggling college student, consider these options:
- Use income-based repayment plans like Pay As You Earn (PAYE) or Income-Based Repayment (IBR). These programs forgive some or all unpaid balances after 10 years at current income levels; however, these plans don't eliminate them completely like other forgiveness programs do-they just reduce how much is owed each month based on how much income you earn from work after submitting paperwork showing proof of employment every year.*
- Consolidate existing debts into one new loan through consolidation loans such as those offered by JP Morgan Chase Bank
Defaulting on a private student loan can have serious consequences
If you're in default, it's time to reach out to your lender. Don't ignore the problem; don't wait until you are in default to contact them. You'll want to make sure that all of your payments are current and on time, and that any outstanding debt has been addressed through one of their programs like Debt Management or Income-Based Repayment (IBR).
If there's no way for you to make payments without causing more damage, then it may be best for them not just to forgive what is owed but also to cancel any remaining debts as well. This can help keep future problems from happening down the line when interest rates start rising again due to market conditions—and could mean saving money overall by getting rid of those pesky bills today!
Conclusion
We hope you never have to go through what we did, but if you do, please let us know. We love to help. and u can check our blog for info.
