Are The Consequences Of Defaulting On My Student Loan Really That Serious?

If you’re like most graduates, you’re probably carrying anywhere from hundreds to thousands of dollars in student loan debt. And if you’re on the higher end of that spectrum, you’ve probably considered defaulting on your loans.

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Truth be told, student loans can be quite ‘sticky’ as they tend to stay with the borrower or cosigner no matter what. It’s not uncommon to find borrowers unable to make timely payments, which usually result in late payment fees. But what about defaulting on the loan?

You may have heard about the famous (or infamous) student loan borrower who chose to default and whose story was posted in the New York Times:

Why I Defaulted on My Student Loans

ONE late summer afternoon when I was 17, I went with my mother to the local bank, a long-defunct institution whose name I cannot remember, to apply for my first student loan. My mother co-signed. When we finished, the banker, a balding man in his late 50s, congratulated us, as if I had just won some kind of award rather than signed away my young life. Read full post here…

This is the type of story that could get you riled up to the point of defaulting on your student loan too. The author, apart from defending his decision to ignore his student loan obligation, goes ahead to encourage others to join him in an effort to change the way government goes about availing education to its citizens.

If people groaning under the weight of student loans simply said, “Enough,” then all the pieties about debt that have become absorbed into all the pieties about higher education might be brought into alignment with reality. Instead of guaranteeing loans, the government would have to guarantee a college education. Via New York Times

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However, there are certain important considerations you must make before you decide to default on your student loans. There are serious personal and lifelong financial consequences that could result for such a decision.

One is the fact that when it comes to debt collection, the Department of Education may just be the worst enemy you could have, as some residents of Houston are now discovering:

US Marshals arresting people for not paying their federal student loans

HOUSTON (FOX 26) – Believe it or not, the US Marshals Service in Houston is arresting people for not paying their outstanding federal student loans.

Paul Aker says he was arrested at his home last week for a $1500 federal student loan he received in 1987.

He says seven deputy US Marshals showed up at his home with guns and took him to federal court where he had to sign a payment plan for the 29-year-old school loan. Read more here…

Federal student loan debt collectors have much more power than typical creditors. They can take away your tax refunds and social security checks without needing to go to court. You can’t even seek relief through bankruptcy for federal student loans. Allie Conti goes into more detail on this:

I Asked an Expert What Would Happen if I Just Stopped Paying My Student Loans

Yesterday morning I got an email from a young aspiring journalist who wanted to know if a master’s degree was worth it. His plight was pretty familiar: Go deeper into debt in a gamble to give your career a push, or keep on the same path, working a job while trying to cobble together a real-world education equivalent to an advanced degree.

I gave him the usual spiel I trot out when I get emails like that: Go back to school, take a chance! Then, as soon as I’d finished patting myself on the back for taking time out of my day to dole out life advice to a stranger, I was hiding in the back of the office, whispering to a representative from FedLoan Servicing through my cell. Read the full story here…

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So what’s the solution? As Conti was advised, it’s best to keep your repayments current for at least 25 years, at which point you will be eligible for some cancellation. Even if you are unable to stay current, avoid going into default because it take nine months of non-repayment to do so, and things will only escalate from there.

There are smart ways of drawing attention to the real problem here, which is the high cost of education. Turning yourself into a human sacrifice in the name of activism is not one of them.

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