Francis Mwendo
Hidden Dangers Of Student Loans
Knowledge may be free but education sure is not! That's the
irony of life. Today in keeping with the rising inflation
in all other areas of our economic life, education costs
have also risen.
An average individual in an American household usually pays
for his own education and does that with either with a loan
or, if he is lucky enough then through a scholarship. Of
course, in a scholarship the student does not have to pay
back the scholarship provider for the grant. The
competition for scholarships is fierce and therefore a huge
number of students end up with the option of taking a
student loan for the purpose. Also a scholarship does not
pay for other student needs like housing for instance.
The assumption a student makes is that once he graduates
and gets a job, repayment is not too difficult. All this
seems fine until he encounter certain road blocks.
One of them is dropping out of college. There is no written
rule that having taken a loan a student ensures that he
completes his education. Somewhere down the line he may
discover that he does not like the course much. Or he
realizes he is better off doing something else. In such
circumstances while the education is suspended or stopped,
the loan continues.
Or take the high rate of interest that most lenders charge.
Federal loans cost less in comparison but again the
payments have to be regularly cleared. Added to this, there
maybe several other student expenses not covered by the
loan that a student needs to manage.
And we are not talking yet about other valid reasons like
illness and personal factors that may cause a disruption of
payments.
Even in normal circumstances a student may end up
graduating with a degree in one hand and a loan on his
mind. The repayment of the loan may stretch up to 20 of the
best years of his life.
So what happen when a student defaults on his loan? Even
before that happens, something can be done to help.
As soon as you as a student become aware that you are in
danger of defaulting on the payment, contact the lender and
request for a deferment or forebearance. What happens here
is that your lender may choose to then to postpone the
repayment of the principal for a determined period, at the
end of which it reverts to the original repayment status.
For certain federal loans you can take a break for a period
that would be almost half the school time. You can even be
exempted from the interest being accrued for this period as
the federal government pays the same. This is however not
applicable to other loans. Deferments are subject to the
discretion of the lender and applicable in some specific
circumstances.
A request for forebearance only allows you postpone or to
reduce your payments but the interest continues to add up,
which has to be paid during this period. Here again, there
are specific conditions that you have to fulfill as
determined by the lender.
So what happens if you do not exercise these options and
default? You may risk having to deal with debt collectors
knocking on your door. And to add to the woe the lender
will charge you their service fees as well!
Along with this, you risk being taken to court for the
entire amount of your loan. As a student you definitely do
not want to get on the wrong side of the law.
And of course your credit ratings will plummet, something
which may not mean much as a student but which will throw
up unnecessary complications at a later date.
You would definitely not be happy when your bad credit
record may actually make it difficult for you when seeking
employment. Your applications for home or car loans can
well be rejected and that's not what you will like for
sure. If you want to get a credit card sometime in the
future, even that may be difficult to have. If you thought
it can't get worse than this, well, you can bid good bye to
any deferment you need in the future and years later you my
even have difficulty renewing your professional licence.
All in all, taking a student loan may ease your education
expenses but if mismanaged will saddle you with a burden
too hard and too long to bear.
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Francis Mwendo is an Internet consultant, publisher and
marketer focusing on Debt/Loans items. To FIND cutting-edge
products on Debt Consolidation Services, primarily, Payday
Loans, and Student Loans Consolidation, VISIT THIS SITE:
