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By: Katie Spencer

Avoid Default at All Costs
A Student’s Financial Guide to Success

Skipping class is nothing compared to skipping a student loan payment. The consequences of defaulting on a student loan payment when they are past due are far more severe. At this point in time, your lender can file a default claim with the guarantor of your loan. Following payment of the claim, the guarantor may initiate proceedings to embellish your wages, confiscate your state and federal tax refunds and other payments made to you by the federal government, or even assign your loan to the federal government for litigation against you. This is the last thing you want to happen to you especially just after graduating. There are so many student financial guides provided for you at your fingertips that it’s important to utilize them.

The majority of college students that graduate end up with some sort of debt and having a past due payment on you student loan(s) is definitely not in anyone’s future. This negative information may remain on your credit report for up to seven years, affecting your ability to purchase a home or car loan, or other credit purchases, which is what a lot of college students look to do or have to, once they graduate.

Follow these wise tips to avoid defaulting on your student loan(s):
• Graduate! - Students who complete college are less likely to have trouble in the future making monthly payments. A college degree also increases your chances of receiving a higher paying job.
• Contact your lender - If you think that you are going to be unable to make a monthly payment call your lender and they can discuss alternatives such as deferments or forbearances, which allow you to postpone payments, as well as choosing different repayment plans.
• Take advantage of free services – Accept discounts and rebates offered by your lender as well as free services offered to you by your school. If your lender offers repayment benefits for responsible borrowers, you should definitely sign up! You can save up to hundreds or even thousands of dollars for just having your payment deducted automatically from a bank account or making payments before the due date.
• Pay off other debts during your grace period – The grace period is the time after you leave school and before your first student loan payment is due which is usually six months. If you can make 13 payments within a year instead of 12 you will see a big difference in your overall balance.
• Use loan for student expenses only - A student loan should be used for student expenses only. Although it may be tempting to use student loan money for college football tickets, midnight pizza while cramming for finals, or a Florida spring break trip, but be sure to resist this temptation.
If making payments on time comes as a challenge for you, there are several ways you can postpone repayment of your student loans. This way, you are not stressed or in danger of defaulting on your loan.

Ways to postpone your repayment

There are two ways to postpone repayment of your loans, by deferment and forbearance. Deferment is an entitlement that must be granted if you meet specific conditions, but you're not automatically entitled to a forbearance, which is granted at the discretion of your lender. Both forbearance and deferment allow you to temporarily cease making payments, or make smaller monthly payments than required by your repayment schedule.

However if you choose to postpone your repayment of your loans, interest will still continue to accrue. On the other hand, with a subsidized student loan, the government pays the interest that accrues during a period of authorized deferment. You’re only responsibility is for any interest that accrues during any period of forbearance and for interest that accrues on an unsubsidized student loan during a period of deferment.

The types of deferment are:
• In-school deferment
• Unemployment deferment
• Education-related deferment
• Economic hardship deferment
• Parental leave/working mother deferment
• PLUS borrower with dependent student deferment
• Public borrower with dependent deferment
• Public service deferment
• Temporary disability deferment

Contact your lender to see if you are applicable for either deferment or forbearance if you feel you won’t be able to make your payments on time.

If you're having financial difficulties, you’re not alone. The thing to remember is that you have a variety of options to choose from. There are people who can help answer questions for you and deal with unfortunate circumstances that may arise before and during repayment, or help you with decisions regarding forbearance and deferment.

Want to learn more about college financial success, check out http://www.studentfinancialguide.com, it’s full of information pertaining to college financial help before, during, and after your college years!

About the author:
Katie Spencer is a contributing writer for a number of international financial journals both online and in print. Katie has been delivering financial education to the public in a variety of areas to include college budgeting, credit and debt management, and money saving tips). Recently, Katie has been in partnership with a national educational foundation to deliver financial advice to American consumers via the web. For more information and to read the latest articles published by Katie, please visit http://www.inchargeorg.org.

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