Ask a goalgami Expert:Answer

Have a financial question?SUBMIT>



Question:


What's the worst case scenario if I default on my student loans? My job search is not going too well.
-UniversityXGrad


Answer:


Many student loans are guaranteed by the federal government. Knowing that they won't be left holding the bag makes it easy for lenders to make the loans. The down side of that for borrowers is that the designated bag holder, the government, has greater wherewithal than private lenders to come after defaulters to try to get the money back. Unlike with most debts, the obligation to repay student loans cannot be wiped away in a bankruptcy, and the government has the power to withhold refunds of federal and state income tax from defaulting borrowers or to seize a portion of their wages. Oh, and your credit score will suffer, too, as when you default on other kinds of loans.
 
If it's any consolation, you'll have plenty of company if you do default. By one estimate, nearly 9 percent of recent student loans are in default, close to double the rate of the last decade. Many of those defaulting borrowers never even make a payment. With luck, you'll land a job soon and start whittling down your loan balance. If you don't and you're forced to default, you may still catch a break. With the job market so weak and so many graduates behind on their payments, it may become politically expedient for Washington to orchestrate a bailout program similar to those for banks and carmakers.
-Conrad de Aenlle



< BACK