It’s understandable that someone who graduates college might want to decide to default on their student debt. It can be hard keeping up with monthly payments. You already graduated and trying to get your life in order. Then, here comes the payments, sapping your money. People with student debt are deciding to put off major life decisions. That’s how expensive this crisis is.
Currently in the United States, 44 million people owe $1.53 trillion. That’s a lot of money and a debt most don’t ever see being paid off. That is, unless you talk to one of the Democratic candidates running for office. They all have plans for taking care of student debt. At the same time, 11% of federal borrowers went into default last year.
To go into default means you’ve gone more than 270 days without paying your bill. That’s about 2/3 of a year. While this might seem like a solution for people struggling, it never it. That’s because your student debt never goes away. It will always stick to you until it’s completely paid off. You can’t just declare bankruptcy or hope they’ll stop chasing you.
Let’s take a look at the several ways going into default makes life miserable.
1) Not paying student debt will kill your credit score
35% of your credit score is made up of your payment history. Anything less than 100% on-time payments will hurt you. This is especially true if you go into default. Good luck getting a mortgage or any other type of loan if your student loan is in default. Lenders won’t trust you to pay it back. This is also probably why many people buried under piles of debt put off those big decisions. Going into default forced their hand.
2) You lose access to certain repayment plans
This can be a major one. After you graduate, you have the chance to enroll in difference repayment plans. These plans can help you conquer your student debt. It might take a while, usually up to ten years, but they can be helpful. If you go into default, you can kiss that goodbye. You can even file for a forbearance to pause payments if you’re going through a rough time. That’s not true any longer if you’re in default.
3) You’ll have to pay your whole loan
Lenders know they have to work with students and that’s why they’re willing to put you on a repayment plan. But what happens if you default? Suddenly, your entire student debt becomes due. You’d have to immediately call your lender to discuss putting you on a repayment plan. If not, you’ll be expected to pay it off in whole.
