Citrus North Explained What Happens If You Don’t Pay Back Student Loans

Effects of Defaulting on Your Student Loans

It is important to keep in mind that the federal government’s Covid-19 relief program, referred to by the CARES Act, temporarily suspended the process of collecting federal student loans such as Citrus North. Due to the most recent extension of the forbearance period, the collection process will be suspended until January 31st, 2022. But it’s important to remember this: the CARES Act doesn’t apply to private student loans. In this way, you may be contacted by collection agents or suffer other penalties.

If you’re in the possession of federal or private student loans, failing to pay the loan could be a serious issue that can have long-lasting consequences on your credit. Based on the kind the debt your lender may use the following methods to get their debts paid:

Federal Student Loans

If you’re a beneficiary of federal loans for students The consequences of defaulting on your loan could be devastating. Since the loans you’ve taken out are backed by the government and the servicer of your loan has the following steps to recover the amount you owe

Loan acceleration. If you do not make payments on a federal loan, the entire remaining amount — not just the missed payment will be due, as will the interest due.
Ineligibility for federal assistance. You aren’t eligible to apply for Federal assistance programs, like deferment, forbearance, or loans depending on your income.
The denial of eligibility for financial aid. If you are unable to pay back your loan, you’re no longer qualified for financial aid such as grants. It’s normal for students in college to reach a point at which it becomes difficult to pay back that student loan.

The price of student loans can be a challenge. If you’re on a strict budget, trying to meet the minimum amount, it’s difficult, even when you’re trying to pay for rent or food.

If your financial situation is tight it’s possible to think about cutting your monthly payment in case you’re having financial difficulties. What happens if you’re not enough to cover student loans? The consequences could be catastrophic. Here’s what you should be aware of.

I’m Not Able to Pay My Student Loans: What Should I Expect?

What happens if you don’t make my payments? It’s all based on the type of student loan you’ve got, whether federal or private.

Federal Loan Timeline

Student loans from the Federal government are accessible to postgraduate and undergrad students as well as parents of college students. The loans today are offered through the Direct Loan Program and follow the guidelines listed below. It is crucial to remember that this isn’t in the timeframe of payments for short-term loans or interest relief offered as a response to the epidemic of Covid-19.

After graduation, immediately. If you have direct, unsubsidized, or subsidized loans you have the option of a grace time of six months that begins when you graduate. There is no obligation to pay the debt during the grace period. Parent PLUS and Grad Plus loans don’t have a grace period. However, you can decide to defer the loan for six months from when you graduate.
Six months after graduation. Six months after graduation, your loans will be placed into repayment. You will have to begin paying off your loan in accordance with the repayment schedule specified that is in your loan contract. A default repayment plan includes 10-year terms as well as monthly fixed payments.
If your loan is due in advance of one calendar day. If you’re in arrears by the amount of an entire working day your loan is declared in default. Your account will be deemed in default until you pay the overdue balance, as and any additional charges.
When your payment is due, it is 30 days late. If you don’t pay the entire installment on time within 30 days from when the date is due, the lender will charge the late fee. The penalty could amount to at least 6 percent of the amount due.
If the amount is over 90 days overdue. If you’re in arrears for more than 90 calendar days, your company that is servicing the loan is required to notify the lender of the late payment. the leading credit bureaus, such as Equifax, Experian, and TransUnion.
If the due date is more than 270 calendar days late and the loan is put into default if the borrower isn’t paid on time for more than 270 calendar days.

Private Student Timeline for Loans

The sum was around $130 billion in remaining loans for students of private schools at the end of the academic year in 2019 ranging from loans for students at the undergraduate levels to medical school loans. Personal loans are distinct from the federal loan. They are provided by online lenders, banks, and credit unions. The repayment terms vary depending on the lender. In general private loans for students are subject to the following timetable:

Right after graduation. Although some lenders give time-based grace periods for borrowers, it’s not the case for all lenders. Certain lenders require you to pay them immediately upon your graduation.
The due date is within a day of being late. It has been one day since the due date and the lender will appear to be in default and will report the default to credit bureaus.
The due date is 90 days after the due date. If you are 90 days late the lender may consider that you’re in default. They could try to collect the amount by contacting an agency for collection or a court.
The payment is due within 120 days. The lender typically debits the account when it’s over 120 days overdue. The lender will pass this debt to a collection company, which will handle the loan from that point on.

Credit reporting. The lender will add your defaulted situation on the credit accounts, which can greatly impact the credit score. If you’ve got an unpaid status on your credit reports, it may be difficult to obtain alternative credit options, like auto loans, mortgages, or mortgages.
Treasury offset. If you’re eligible to get tax-free refunds as well as Social Security payments, the government could withhold the cash and put it towards what you owe. This is known as an offset to the Treasury offset.
Wage garnishment. The government could call your employer and ask that they garnish a portion of your earnings to assist you in repaying your loans.
Lawsuits. The government could have you in the court and you may be ordered to pay court costs and attorney fees.
Collections. The loan servicer can transfer the account to an agency for collection. If this occurs, the collection agency will try to collect the debt and you’ll be asked to pay collection charges.
Refusal of transcripts. If you’re not complying the school could suspend your transcripts, rendering it impossible to verify whether you’ve made progress, or changed to another school.

Private Student Loans

Private lenders who offer student loans don’t possess the exact rights to collect loans in default that the federal government has. Although private lenders aren’t able to receive tax refunds, the consequence could be grave.

Late fees. Most private lenders charge late fees. They typically charge 5 percent of the amount due.
Credit reporting. The default data you provide for credit bureaus. This could seriously harm your credit.
Collections. The lender can transfer the money to a collection agency which will then collect the loan. The loan contract could contain an obligation that states you’re responsible for the costs of the collection process, such as attorney costs and court fees.
Lawsuits. The lender can file a claim against you and take you before a judge. If the lawsuit succeeds and they win the court, they’ll get an order by the court that allows the lender to take your wages.

7 Things You Should Do If You’re Not Able to Pay Your Student Loans

If you are unable to pay the student loan, it is imperative to act fast. There’s a good chance that you have one or more options to manage your debt.

1. Alternative Payment Plans

If you’re struggling to make your monthly payments but you’ve never skipped one for a while, you might be qualified to enroll in an alternative plan of payment. If you’re part of the federal student loan program You can take advantage of the following options to help:

IDR: Income-driven Repayment plans calculate your monthly installment based depending on the size of your family and the amount of income you can earn at your to choose from, as well as the amount that you will receive your money. If you’ve seen a decline in your salary, it’s possible to significantly decrease the amount you have to pay through enrollment in IDR plans. IDR plan.
Forbearance or deferment: If you are unable to pay your monthly bills because you lost your job or becoming ill or you’re in financial hardship or another circumstance, you may be able to take advantage of the option of deferring or forbearance in order to delay your payments for a short time. If you experience an issue, you may be eligible for the right to delay payments for at least three years.

Private lenders for student loans typically do not offer alternative payment options but there’s no law that obliges private lenders to ease payments. However, certain lenders will help borrowers who have low monthly payments, or with interest-only payments for a specified time. If you’re experiencing a serious financial burden Some lenders allow you to defer your payments up to several months. Contact your loan company and inquire about the possibilities available to you.

2. Federal Loans Consolidation

If you’re an unsecured federal debtor, one method to avoid insolvency could be to consolidate your debts and directly-consolidation loans. To be qualified, you have to make three on-time, monthly payments, and then sign up for the IDR program.

3. Federal Loans Rehabilitation

If you do not want to apply for federal consolidation of loans, a different option in order to prevent default Rehabilitation of the loan. This procedure requires you to commit on paper to make nine punctual monthly installments. If you make the nine timely payments within 10 months, your loan will be transferred out of default.

4. Private Rehabilitation

Private lenders might not have access to similar rehabilitation programs as federal banks however, private lenders might employ their own strategies to avoid default. Contact your lender for information about the process to reinstate your current loan to a satisfactory conclusion.

5. Student Refinancing Loans

If you’re a college student with either federal or private student loans, refinancing them is an alternative method to avoid being in default. If you decide to refinance those loans you have taken out, you may take out a loan with an individual lender and utilize the loan to settle your existing debt. Once you’ve paid the loan you have already paid and the debt is considered to be completely paid and you’ll no longer have to be in default. The new loans will have distinct terms and conditions. You’ll be able to select an extended repayment period to get a reasonable monthly installment.

If you’ve defaulted previously on loans or loans, your credit is likely to be damaged and it might be difficult to qualify for refinancing loans. However, you might be considered if seeking a co-signer who is of good credit.

6. Student Loan Settlement

In some rare cases, it is possible to have the possibility of settling federal or private loans with less than what you are required to pay. However, you’ll need to pay off the principal portion of your loan in one payment which isn’t feasible for everyone.

If you’re considering the use of a settlement for student loans as an option to overcome your default you should consider hiring an attorney with experience with student debts to get guidance tailored to your particular situation and geographic area. Legal resources are available on the NCL’s website on student loans.

7. Bankruptcy

It’s not an easy task to get student loans removed from bankruptcy. But, it’s possible. In July 2021 the Federal Appeal Court determined that student loans weren’t disqualified from discharge in bankruptcy and opened the possibility for personal loan borrowers to pay off their debts.

The process of filing for bankruptcy is significant and may have repercussions lasting for a long time. If you’re thinking of filing bankruptcy, make sure you look at all the options. You should also think about talking to an attorney to discuss the possibility of dissolving your loan.

How do you handle your student loan debt?

In the event that you are aware the consequences in the event that you do not pay back your student loans then you’ll be able to make a plan to make sure you don’t make payments. If you think your monthly payments are too high or you’re concerned about your health or job You should speak with your lender. You could be eligible to be part of an arrangement that allows for lower monthly payments, or perhaps stop your payments. Be proactive to prevent yourself from falling behind and help protect your credit.