Going to college is certainly not cheap and to pursue higher education, many parents and students apply for loans from the government or from commercial lending companies. Some students acquire multiple student loans for college from various lenders. Even those who are eligible for Federal Student Loans can still get additional financing from private lenders.
The Problem with Student Loans for College
A common problem in acquiring loans is the borrower’s inability to make payments. Some even had to file for bankruptcy because of unpaid student loans. Unfortunately, these young people had to live with a derogatory mark in their credit report because of defaulted student loan payments.
What are the consequences of bad credit history? One disadvantage is that applying for new loans such as a car loan or personal loan can be difficult. Although many lending companies offer bad credit loans, they often charge higher interest rates to protect their best interests.
Some students may find more difficult to compete with other applicants when applying for a job. Employers do check credit reports to evaluate an applicant’s background and having a record of bankruptcy or bad credit will certainly not impress a potential employer.
Debt Repayment After College Graduation
As soon as a student graduates from college, he or she is faced with the responsibility to pay off his/her student loan. Today, filing for bankruptcy has been made more complicated. Anyone who wishes to be discharged from debt repayment through bankruptcy must first go through a credit counseling course with an accredited counseling agency.
In case of a student loan default, the Debt Collection Improvements Act gives the government the right to take away certain federal benefit payments from a borrower. This is why young people are encouraged to use their student loans for financing their education. If applicable, the student can start paying off even just the interest rate of the loan while he/she is still in college.
What can a student with bad credit history do to regain good credit? A student who can’t pay for the loan can acquire help from the FFEL loan consolidation program, the William D. Ford Direct Loan Program or enroll themselves in the U.S. Department of Education’s loan rehabilitation program. These programs were designed for students who are in need of debt repayment assistance. By consolidating multiple loans, the student can enjoy a lower interest rate and reduce the monthly loan payment.
About the Author
Samantha Wilson is a consultant for managing credit cards and finding the best student loans. For years she has written student credit card articles that helps build student credit, and student loan help articles that can be used as guides to handle student loan debt.