I've been out of college for some time now and there is one thing that I have learned: I have to pay back my student loans. Not that I would ever try to skip out on paying back the very loans that got me through school, but there was a time when my student loans were too much for me and almost cost me my good credit.
1.) A Mistake Not Worth Making
At a certain point in my life, when I was between jobs and trying to figure out what I was going to do, I couldn't afford to pay my student loan payments of $125 per month. So, I contacted my lender and asked what I could do. They told me about forbearance. Forbearance allowed me to not make payments due to my economic hardship, thought the interest would continue to accumulate. However, they did say that this would not affect my credit in a negative way.
Unfortunately, what I didn't hear was that it was only OK to do this for six months. So, I mistakenly thought that my loans were safely in forbearance and that I didn't have to pay on them as long as I wanted to. That mistake almost cost me my good credit standing.
1.) The Scary Letter I'll Never Forget
As that six months came and went quickly, by the time it was over I had moved. I had neglected to update my address with the lender and this oversight, along with my bad hearing, nearly cost me my credit. I'm not sure how, but the lender did manage to get my new address and I'm glad they did. The letter I received said that I was dangerously close to being in default and that if I didn't take action the lender would keep my tax returns as well as seek other alternate ways to get their money back.
1.) Action Required Now
I immediately contacted the lender and found out what I had to do in order to keep my account out of default. Since I had missed four months worth of payments by this time as my loans were no longer in forbearance, I owed $500 in payments, plus another $200 in late fees. As I did not have the $700 at the time, I had to put that amount on a credit card for even more interest charges to pile on. But, at least I got my account in order.
1.) Not Empty Threats
After the ordeal, I investigated just how serious a student loan default is. I can tell you that the letter I received was dead on. There is just no getting away from student loans. You can't even have them discharged in a bankruptcy as you can most other debts. They are with you until the end, so in order to keep your credit in check you have to keep your loan payments in check. And yes, your student loans do get reported to all three credit bureaus. One way or another they will get paid back. That threat about taking your tax return is true. It happened to my college roommate not three years ago. He has since gotten his loans straightened out, but it did end up costing him his good credit and it will be a while before it builds back up.
As for me, I will continue to pay my student loans on time every month (yes, I'm still paying them) as I want nothing to go wrong with my credit. I have already learned the hard way that one mistake with student loans can easily cost me my credit and that is something I am not willing to let happen.
