Consolidating student loans and default


10-May-2020 05:18

The private student loan market is especially complicated, so having someone who understands the system, your rights and your options is crucial.Getting out of default on federal student loans is hard, but not impossible.Unlike with federal loans, creditors can’t immediately garnish your wages, Social Security checks or tax returns to collect the debt you owe on private student loans.But if you don’t pay, the loan holder could earn the right to do those things if it files a lawsuit against you and wins.

If you don’t catch up on your private loan payments, your loan holder will consider your loan “charged off,” or uncollectible, when you’re 120 to 180 days behind, depending on the lender.The two main post-default repayment programs for government loan borrowers are consolidation and rehabilitation.Before considering these options, you should evaluate whether you are eligible to cancel your loan.“There is no rehabilitation with private loans.” But you still owe the debt even after it’s charged off.

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Your loan holder can sue you to collect on the debt, but not all lenders do, Cohen says.A late payment will start affecting your credit score after it’s 90 days late, but the most serious consequences hit when your loan goes into default.