Almost everyone has missed a student loan payment at least once. According to the Federal Student Aid Department, as of December 2018, over 3 million borrowers have been at least a month behind on the payments of their federal direct loans. Even though this is common, you will be punished for missing a payment.
In most cases, missed student loan payments lead to late fees as well as credit damage. If you do not catch up with payments and your loans enter default, you could face wage and tax repayment garnishment. You must ensure that you do not fall behind on your payments and if you do, catch up quickly. In this article, we will discuss avoiding late payments as well as the penalties of missing student loan payments.
Avoiding Late Student Loan Payments
It isn’t the end of the world if you miss one student loan payment but you must pay the amount that is due before the penalties become too much. The best way to avoid further late payments is to figure out the reasons why you fell behind. This way, you will be able to be on track with all your student loan payments. Let’s take a look at some of the major reasons why people fall behind on their payments, shall we?
Forgetting due date of payments
The best way to avoid late payments due to this reason is to enroll in autopay with your lender. With this option, the money you owe will be deducted automatically every month from your account. This way, there will be no worry about late payments again. However, you should observe the balance in your account closely to avoid overdraft penalties.
Never receiving a bill
The best solution to this is to confirm your contact details as paying your loans timely is your responsibility. Ensure that your loan servicer has your most up to date contact information.
Short-time financial issues
The best option if you run into short term financial issues is to pause your repayments with deferment. With this option, the government will pay the interest on these loans during your break. This way, you avoid late payments and penalties. So, if you do miss payments on your student loan, what will happen?
Penalties of Missing Student Loan Payments
Here are the consequences if you miss your federal student loan payments:
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Payments past due more than 30 days – your loan servicer can charge you over 5% of the payments missed as your late fee
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Payments past due over 90 days – Here, your loan servicer will report your late payments to the credit bureaus and it will remain on your credit record for seven years. Late payments after 90 days will also lower your credit scores.
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Payments Past Due after 270 days – here, your student loans will enter default and new penalties such as tax refund seizure and collection cost will be given to you
If you are struggling to keep up with your student loan payments, you have options. Elias Dsouza has the knowledge and experience to get you back on track. Contact Elias today for a free consultation.