Tips for Staying Out of Student Loan Default

While paying off student loans is an admirable goal, it could all be for naught if the borrower is unable to maintain timely payments. The Education Department has provided the following advice for avoiding loan default:

Start an income-based payment plan. Your federal student loan payments could be capped at a certain percentage of your discretionary income, depending on your family size, if you enrolled in an income-driven repayment plan (IDR).

Your remaining balance on your federal student loans will be forgiven after a set period of time, typically 20 or 25 years. Only those with a federal student loan are eligible to choose this option.

Put in place a system of automatic deductions. If you sign up for autopay with your loan servicer, they will automatically deduct your payment from your bank account on the due date each month.

It's possible to get a discount on your interest rate of about 0.25 percentage points, depending on the loans you have. A borrower of a federal or private student loan can sign up for automatic payments.

Maintain consistent contact with your loan servicer. Maintain a spreadsheet or other method of recording your student loan balance, payment schedule, and monthly payments. Loan status updates from private loan providers are typically available online. Accessible to those who have taken out federal student loans, the Federal Student Aid website provides this data. In case your loan servicer needs to get in touch with you, it is a good idea to double-check that the details you have provided are correct.

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