Submitted by: Wade Robins

One of the terms you agree to when you accept a student loan is that you will be required to start repaying your loan either when your status as a full-time student changes, or at some specified point following your graduation. If you reach either of those milestones and do not make your required loan repayments, you will have defaulted on your student loans. And having defaulted student loans on your credit history can negatively affect your financial future for years, so you should avoid defaulting if at all possible.

The inclusion of defaulted student loans on your credit history will be a red flag for all future lenders to whom you apply for loans, be they automobile loans, home mortgages, or credit cards. Your defaulted student loans are a sign that you are not serious about your financial obligations, and you may not realize that having a poor credit rating can result in your not qualifying for certain jobs. You can even be turned down for some types of insurance, or by some landlords, if your credit rating is poor.

As unfair as it may seem, your credit score has a direct and significant effect on your quality of life. Having a record of defaulted student loans can not only interfere with your finding a job, housing, or insurance; it could end with your being sued for repayment and having to pay back not only what you owe on the loans but accumulated interest and penalties as well.

Defaulted Student Loans Will Cost You Dearly

You may think that because you are still young, and have plenty of time to build your credit record so that the defaulted student loans do not weigh so heavily against it, you will not be adversely affected for very long. But simply because of those defaulted student loans your opportunities to prove yourself creditworthy with other lenders are apt to be few and far between, so you need to figure out how to get rid of the defaults as quickly as you can.

Your Solutions

The first line of defense against defaulted student loans is simply to pay your payments consistently and on time. But if you have a legitimate financial crisis which eliminates this option, there are alternatives available to help you avoid defaulting.

You should definitely investigate your student loan deferral options, which is designed expressly to let your extend your repayment grace period during times of financial difficulty, or in other situations which may make repayment difficult, as long as they are not of your doing.

If, you see the possibility of defaulted student loans in your future, you should let your lender know before you start missing your payments. Contact the board of education in your state to find out if there are any payment deferral options. If a student loan consolidation will help, investigate the possibilities. You may find that by consolidating your student loans you will lower your total monthly payments, so that the possibility of having to default disappears.

Defaulted student loans will be a black mark on your financial history for years to come, so do whatever you can to get your repayment plan under control!

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