Money Matters: 6 Reasons to avoid defaulting on your student loans

You know all the reasons why getting a college education is the answer to your future success and why it's worth the investment.  Realistically, sometimes paying off the loans that funded your education can be challenging.  But defaulting on your student loans is a very serious problem that can be avoided.  Here are some excellent reasons not to default on your student loans. 

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1.  Debt collectors are aggressive.

If debt collectors are sometimes likened to junkyard dogs, the Department of Education would be the one who is not chained or fenced. They may call you repeatedly and become a nuisance and embarrassment to you. 

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2.  It will cost you more in the long-run.
Skipping or making late payments will result in additional fees and penalties that can add up quickly.  If you fully default and stop making payments altogether, those costs can skyrocket.  Eventually, you'll have to pay for the original amount of the loan(s) PLUS inflated interest, penalties, and even legal costs if you let it go that far.

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3.  Student loans don't go away.
There is no statute of limitations on federal student loans, which means its collectors can chase you to your grave.  Along the way, your loan originator can take your tax refunds and garnish your wages without having to go to court. They can even take a bite out of your Social Security checks after you retire, something other creditors cannot do.

4.  Student default will hurt your credit score.
A single missed payment will label you as "delinquent," but when your payment becomes 90 days past due, your account will be reported to the three major credit bureaus and your credit score will tank.  This means you'll pay a high interest rate when you buy a car or get a credit card, and your car insurance premiums will be sky-high.  The size of deposits required for utilities and cell phones will be huge, also, as a result of poor credit.

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5. It can impact your ability to get a job.
Credit checks have become routine for some employers doing background checks on potential employees.  Do you think you'll get hired if you have a poor credit score because you purposely ignore your financial obligations?

6.  It can affect your ability to get a decent apartment.
Landlords are routinely doing credit checks on potential tenants because they want to be sure that the rent will be paid on time and in full.  If you have a good credit score, it shows that you're responsible with your money and pay your bills on time.


Source:  Charter College and Reuters
(c) Robyn King.  All Rights Reserved.