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Q: student loans ( Answered,   0 Comments )
Subject: student loans
Category: Business and Money
Asked by: kittykoo_pdx-ga
List Price: $4.50
Posted: 27 Oct 2006 08:53 PDT
Expires: 26 Nov 2006 07:53 PST
Question ID: 777456
I have both federal and private-lender student loans totalling about
$310,000.  I am unable to make the full payments.  If I diligently
make partial payments, will the lenders still report me as "late" or
unpaid to credit reporting agencies?  If so, what's the point in
paying at all if my credit will be ruined either way?
Subject: Re: student loans
Answered By: keystroke-ga on 27 Oct 2006 09:16 PDT
Hello kittykoo_pdx,

Thank you for your question.

As long as you are making partial payments and let them know of your
situation, they will not bring you into default.  Once you're in
default, the entire payment is due and they can sue you, report you to
collection agencies, garnish your wages, put liens on your tax
refunds, or anything else that's available to them to get the money. 
You will also have to pay collection fees of up to 25 percent in
addition to what you already owe. You will be reported to all three
credit bureaus and your credit score will take a huge hit, affecting
your ability to get future loans or a mortgage.

In other words, you do NOT want to go into default.  

If you can't make the payments, there are a few different things you
can do to try to get the loans deferred. There are ways to get a
deferment or a forebearance if you're going through a hard time. 
After you default, you cannot get a deferment in any way; the entire
amount of the loan is immediately due.  Ask your lender what you can

"If you are having trouble making payments, your lender may be able to
suggest alternate repayment options, such as graduated repayment,
income sensitive repayment and income contingent repayment."

"Consider using a consolidation loan to combine all of your
educational loans into one big loan. This lets you send your payments
to just one lender. You may also be able to extend the term of the
loan in order to reduce the size of your monthly payments."

Income-contingent repayment:

Reasons that you can defer include:

going to school, even part-time
disabled students
economic harship

You have to apply and be accepted for deferment before you can stop
making paymnets. In some cases, interest will still accrue. Even if
you get deferred, you will want to still set money aside each month to
help pay the loans, because eventually you will have to go back to
making the full payments.

Personal knowledge
"Facing Loan Default"
Department of Education

Search terms:
student loans default

If you need any additional clarification, let me know and I'll be glad
to assist you.


Clarification of Answer by keystroke-ga on 27 Oct 2006 09:22 PDT
To add to the answer:

If  you have made a good faith effort to make payments and to try to
get an official deferment or make a partial payment plan, they will
not send you into default.  They actually give you multiple notices
before they send you into default. Many people don't realize how
terrible it is to go into default and don't realize the consequences
until they've let it happen. The company you have your loan from does
not want to take you into lawsuits and hire a collection agency to get
the money-- they have to pay for lawyers and pay the collection agency
40% if they do that. They will do everything not to send you into
default, in fact, and give you multiple warnings before they do so. 
Anyway, contact them, tell them that you can't make the full payments,
and that you would like to set up an alternate payment plan.

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