What’s worse is they don’t even know there are other repayment options. The number one reason employees we help default is because they don’t have the money to pay. In those cases, many people believe their debt doesn’t need to be repaid since they never completed their education. Now, imagine that you didn’t graduate and earn a degree. Servicers can’t repossess your college degree the way banks can repossess your house and car, or they way credit card companies can seize property. Student loans are unique because you’re repaying on a debt for something that you’ve already received and can’t be taken away. It’s frustrating to spend thousands of dollars and years of your life earning a degree that you’re not using. Employees are mad with their college experience and that misguided anger keeps them from making payments. This is also what we call the “spite” reason for default. Some employees are not worried about the consequences of defaulting on student loan payments. Often these people are not concerned with building their credit history and would rather keep their money. Not surprising, some people know they have to pay and just don’t want to. A handful of borrowers compared to their student loan bills to medical bills, believing that the school was going to repay their balance in the same way insurance companies pick up some of the costs in a medical bill. Many people either don’t know the difference between grants and loans or don’t think that loans have to be repaid. Between receiving scholarships, grants, and loans some students are not even sure how their college was paid for. This excuse is more common than you think. Reason #5: “I Didn’t Think I Had to Repay It” For those who do apply, the process of getting loans forgiven can take a long time, resulting in default. Some employees don’t realize that they have to apply for forgiveness in the first place and stop paying. There is a student loan cancellation/forgiveness option known as the “ Borrower Defense to Repayment” for students that felt they were misled through a school’s confirmed misconduct. If you attended a fraudulent institution, you have the option to apply for loan forgiveness. Some employees have stopped paying because they believe their loans have been forgiven or consolidated. Other “debt consolidation,” companies ask for a smaller monthly payment to cover their bills but never work out an agreement with the servicer. The borrowers pay a fee up front and some companies even apply for forgiveness (even though it’s free to apply), but ultimately take the person’s money and do nothing. Some questionable companies ask borrowers for a fee and promise to have their loans forgiven. ![]() Unfortunately, student loan scams are just as prevalent as ever. Reason #7: “I Thought I Was Paying It/Thought it Was Paid” In these cases, employees haven’t been receiving their statements and don’t know that they needed to be repaying it. During these moves, physical mailing and email addresses change, and student loan servicers occasionally lose track of their borrowers. College students move back and forth between their parents’ house to their college address to eventually their own place. Leaving college is a transitional period for millions of young people. We (as well as our affiliate companies) have cured millions of students, ex-students, and graduates from delinquency and default by helping them into sustainable repayment plans. ![]() If you’ve never gone into default, it might be hard to imagine a person ignoring overdue statements and servicer phone calls for 9 months. It’s possible that your income or retirement benefits could even be garnished. ![]() Also, your student loan servicer will likely impose late fees or possibly even sue you through a collection agency. This could limit your ability to take out a loan, apply for a rental property, or even land a job. The missed payments will appear on your credit report and have a negative impact on your credit score. Missing one student loan payment makes you “delinquent.” If you don’t make a payment within 270 days, you will be considered “in default” on your student loans. Further data is needed on employment and earning, but based on the employees we work with, student loan default can happen to anyone. According to a recent report by Brookings, income alone cannot predict who will default on their student loans. ![]() It’s expected that 2 out of 5 student loan borrowers will be under default in the next five years. Even full-time employees default on their student loan payments.
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