My son has fallen behind on his student loan payments. How can he get back on track?
9 Financial Fumbles You Can Fix
- Rules for Paying Off Back Taxes
- Resolve a Complaint About an eBay Purchase
- Undo Your Social Security Claiming Decision
- Resolve a Dispute With a Home Contractor
- Amend Your Tax Return to Correct a Filing Mistake
- Repair Your Credit Score
- What to Do If You're Delinquent on Student Loans
- Change an Airline Ticket
- Get Out of a Time-Share Deal
Have him contact the loan servicer immediately. Even one missed payment is considered a delinquency, and federal loans that have been delinquent for at least 90 days are reported to the three major credit agencies. If your son acts soon enough, he can select a new repayment plan that better fits his budget, or he may qualify to delay loan payments through deferment or forbearance. After 270 days, the loan generally goes into default, and the entire balance, including interest, is due immediately. The borrower also loses eligibility for federal loan benefits, including a choice of repayment plans and the opportunity for loan forgiveness.
If the loan is already in default, your son has two options: rehabilitation and consolidation. Under a rehabilitation agreement, the borrower agrees to a reasonable payment (typically 15% of his or her discretionary income, as defined by the loan program) and must make nine on-time payments during a consecutive 10-month period before the loan comes out of default. The borrower regains eligibility for federal loan benefits, and the default is taken off the borrower’s credit history. Be aware that loans can be rehabilitated only once.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The second option is to consolidate defaulted federal loans through a federal direct consolidation loan. This allows you to replace one or more federal loans with one new, fixed-rate loan. To consolidate a defaulted loan, a borrower must either agree to one of the federal income-driven repayment plans or make three consecutive on-time full monthly payments on the defaulted loans. Consolidation is faster than rehabilitation and restores access to federal loan benefits, but it doesn't remove the default from the borrower's credit history.
For private loans, your son should work with the lender to set up a payment plan. If the debt is already in collection, have him try to negotiate a settlement with the agency.
-
BJ's Wholesale Pops on Membership Fee Hike, Stock BuybacksBJ's stock is rallying Thursday after the warehouse club raised its membership fee for the first time in seven years and unveiled a big stock buyback program. Here's what you need to know.
-
Why Snowflake Stock Is Still a Buy After EarningsSnowflake stock is surging Thursday after cloud company beat expectations for its third quarter and raised its full-year outlook. Here's what you need to know.
-
Five Ways to Save on Vacation Rental PropertiesTravel Use these strategies to pay less for an apartment, condo or house when you travel.
-
How to Avoid Annoying Hotel Fees: Per Person, Parking and MoreTravel Here's how to avoid extra charges and make sure you don't get stuck paying for amenities that you don't use.
-
How to Appeal an Unexpected Medical Billhealth insurance You may receive a bill because your insurance company denied a claim—but that doesn’t mean you have to pay it.
-
Amazon Prime Fees Are Rising. Here’s How to Cancel Your Amazon Prime MembershipAmazon Prime Amazon Prime will soon cost $139 a year, $180 for those who pay monthly. If you’re a subscriber, maybe it’s time to rethink your relationship. Here’s a step-by-step guide to canceling Prime.
-
How to Haggle for Almost AnythingSmart Buying Learning how to haggle is an invaluable skill. These strategies will help you negotiate a better price for just about any product or service.
-
Disability Insurance Can Provide COVID CoverageCoronavirus and Your Money If you are concerned about long-term complications from COVID-19, consider disability insurance coverage.
-
21 Things You Can't Return to Amazon — Either Online or In-StoreDid you know there are things you can't return to Amazon? Before tossing these items into your shopping cart, be sure to read Amazon's return policy first.
-
How to Avoid a Charity Scampersonal finance Scammers never quit, even when you're trying to be altruistic. But you can avoid getting duped if you do your homework.
