The Burden of Student Loan Default; How to deal with a Loan Default Notice?
Loan default is the failure on a borrower’s part to fulfill the financial terms of a loan contract as agreed upon by the debtor and creditor while taking up a loan. When one takes a loan, one shoulders a burden to a regular financial obligation. Any irregularity in the schedule of these obligations of repayment is known as default in Loan default in banking or financial domains. Nothing is more overburdening to a student about to begin his career than the chances of a Student Loan Default.
What is a Student Loan Default?
A student loan default is the failure to meet the repayment conditions of an underlying student loan, which he or she had opted for in order to be able to pay for his tuition to complete his or her studies. Every loan contract comes attached with certain previously agreed upon terms, by both the parties for financial compensations and legal compensations, or in simple terms the consequences one has to bear, if there is any default in the student loan.
A student loan default can be two kinds.
- Federal Student Loans: Federal student loans often get tick-marked as default once, nine months or 270 days precisely are passed after the due date of repayment as agreed upon previously.
- Private Student Loans: A Private student loan default generally gets into proceedings after three missed payment schedules or 120 days exactly after the due date is passed.
What is Notice of Default?
A notice of default is a legally binding notice of warning issued by the lender in accordance with the terms of the loan agreed upon, seeking legal compensation and fast repayment of either the default amount not paid or the entire loan amount along with interest within a certain time interval before the door of the court is knocked.
The best ways to deal with a Notice of Default are to.
- Information Check: One needs to be entirely sure of the terms and conditions mentioned in the notice of default so as to understand what terms are to be legally binding on part of both the parties. Not knowing about every point covered in the notice of warning can lead to disastrous results.
- Communication with the Lender: A proper channel of communication needs to be established with the Lender or the appointed authority, representative of the lender to understand what their obligations are and on what terms are they going to capitalize upon to make your case legally binding. The air needs to be clear.
- Discuss Payment Options: It is always advised to be clear on payment options available before a case is registered or further legal battles are ensued. The lender can accommodate any requests on the part of the borrower to facilitate the same.
The burden of a student loan default might not be as overwhelming as it sounds if one is clear on each of the above aspects of the binding contract that one has had to agree upon.