Avoiding Default

The best way to avoid default is to not borrow too much money. Even if this means that you have to sit out a semester or two of college to work and earn the money necessary for the education rather than borrowing it, this is much better of an alternative than going into debt that you cannot repay. Students are impatient, and many feel they want to be done with school and on with their careers sooner rather than later, but sometimes patience makes the difference between a good credit rating and a poor one.

The obvious way to avoid default is to pay beck your loan. Of course, this is not always possible. If you find yourself in a difficult situation with your student loan, start by contacting your lender and explaining the situation. Often arrangements can be made to help you pay back the loan on different terms. This is a far better situation than allowing the loan to end up in default by doing nothing.

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Getting Out of Default

If you find that you are in default, you have some options to beginning the process of repairing your credit rating. First of all, you need to know that bankruptcy is not the best option. Student laws do not fall under bankruptcy laws, and are not discharged if you file.

If you need to have your credit rating fixed, and still need more aid, then you will want to talk to your loan guarantor about loan rehabilitation. This is a strict payment program that repairs your credit history, and allows you to stay eligible for aid. You can find out more about this by contacting collections@nela.net, provided you have a NELA guaranteed loan. This may not work for default private student loans.

Another option to keep you eligible for aid is to consolidate defaulted student loans. After three months of successfully paying on your loans, you can consolidate your loans into one loan, and this gives you extra time to repay it, and only requires one monthly payment. The NELA can also give you a listing of the lenders who offer this consolidation service, and you can find out more by e-mailing policy@nela.net

If you find that you are facing defaulted student loans, do everything you can to rectify the situation. Getting out of default should be your first priority, as student loan default has a terrible and lasting effect on your credit rating. Take this very seriously!

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