Can you default on a private student loan? The short answer is no, but some circumstances may make it possible. Cannot take out private student loans for education-related expenses. If you have not made all of your required monthly student loan payments for either the semester or year, then you are considered to be in severe default.
Even if you continue to meet specific eligibility requirements, there is a good chance that you will face the possibility of student loans being declined. If you are in serious default, you may already be placed in deferment. This means that you will continue to pay interest rates on the loan even after you have been declared in deferment. If you were to start missing payments, you would more than likely end up in foreclosure, and the loss of ownership of the home could also occur.
Private Student Loans
Can send strategic default private student loans through various lending institutions, including banks, credit unions, and other third-party institutions. Private lenders will generally do their business directly with the United States Department of Education through the Federal Family Education Loan Program (FFELP). When you apply for federal student loans, all of the paperwork is done at the government level. Therefore, private lenders will send your application directly to the U.S. Department of Education. If you decide not to go with a private lender, you will still receive help from the federal government. The department offers assistance to students who need it most.
Arrangement with Lender
There are many ways to avoid having private student loans fall into default, but sometimes situations arise that call for immediate action. First, try to work out an arrangement with the lender to extend the period you need to pay back your loan. Second, talk to your lender about what to do if your payments come too late. If you continue to make your payments late, the lender may cut off your federal education funding. If this happens, you can contact the U.S. Department of Education to find out what other options you have.
What is Perfect Credit?
Private loans can fall into default when you miss payments or default altogether. If you have good credit, you may not have any problems in making your payments. However, even people with less than perfect credit can run into trouble with defaults if they cannot keep up with their payments. To avoid having your loans default, try to get re-evaluated every few years. Talk to a financial advisor if you need help calculating your eligibility for re-evaluation.
As discussed above, deferments are one of several repayment options that private student loans offer. Unfortunately, not all students can benefit from this type of deferment. If a borrower has good credit, he may use his deferred payments to reduce the principal on his loan. Bad credit borrowers can use repayment options such as forbearance to free up some of the money you would have used to repay your loans.
The third thing you can do if you think you might be facing a private student loan default is to request a copy of your credit report and FICO score. You should obtain your credit report at least once a year, and this can give you a good idea of any errors that may exist. An adverse credit report can significantly affect your ability to get a loan or credit card. Even a single missed payment, which does not occur often, can result in your credit score being lowered by hundreds of points. The best way to avoid a negative credit score is to stay on top of everything.
One more thing you can do if you think that you might be facing a default is to try negotiating with your lender. Student lenders are not a habit of throwing people out when they find they cannot pay their loans. If you contact them and explain your circumstances, they may be willing to work with you. On the other hand, it’s important to remember that your lender will not offer you any concessions if you have filed for bankruptcy in the past.