By Chris Cook, Financial Aid Administrator, Minnesota School of Busines-Rochester
Minnesota School of Business-Rochester financial aid department is here to help you manage your financial aid loans, including tips for avoiding default.
Learning that your loans are in default could be scarier than living on Elm Street. Don’t let default happen to you…
What is “default?”
When you originally signed your promissory note for your student loans, you agreed to pay back your student loan as scheduled. If you fail to make these payments, you risk going into default. One or two missed payments does not put you into default. However, if several scheduled payments have been missed, you are at high risk of falling into default. Learn more about default at http://studentaid.ed.gov/repay-loans/default
How would a default affect me?
If you default on your student loans:
- Your credit rating will suffer, which may make getting other loans difficult, if not impossible.
- You will likely receive calls and letters from collectors.
- Your wages may be garnished, or if you are due a federal income tax refund, your refund may be seized.
- You will pay more in the long run with a defaulted loan, after collection costs are added.
- You are unable to obtain future student aid (Stafford loans, Pell Grant, etc.)
- The debt doesn’t go away. Unpaid loans stay with you until paid back in full.
The good news?
The best thing you can do, obviously, is not put yourself in a situation where you risk defaulting in the first place.
Ways to prevent default
- Make your scheduled loan payments when they come due. Remember, you should expect student loan bills within a few months after graduating or leaving school.
- Be sure your address, phone and email are current with both Minnesota School of Business and your lenders/loan servicers.
- If you can’t make the scheduled payments, don’t worry! Contact your loan servicer for different repayment options. Many times students don’t even realize there are several options for loan repayment. A complete list of repayment options is available at: http://studentaid.ed.gov/repay-loans/understand/plans
Resolving your default
If you do ever find yourself in default, there are options to help you clear your default and restore your credit. These options include:
- paying in full
- setting up a repayment plan and successfully making these payments
- loan consolidation
- loan rehabilitation
We want to make sure you know your options and have the knowledge to be a responsible student borrower. If you have questions about avoiding default, please see a member of the Minnesota School of Business financial aid staff. You can call us at (507) 536-9500 or send an email: firstname.lastname@example.org