Consequences Of Not Repaying A Loan On Time
Many academic dreams are given wings and many academic dreams die a painful death
. Students who are academically bright deserve a brighter future but many such futures drown in darkness because of economic weaknesses. To overcome this set back many students take loans from financial institutions thinking that they will repay them once they are out of college and working. Due to the deflated and competitive job market, well paying jobs are seldom found and many degree holders sit at home, jobless.Due to financial conditions and a poor income many borrowers cant repay the borrowed loan. The monthly installments are not paid and the total sum starts piling up along with interest rates and late fees. After 10 months of graduation, the loan goes into default as it crosses the status of repayment. After the loan goes into default it cannot be paid in installments but has to be paid in whole with the additions. This amount is so huge that no one can pay it at once.
As a result your credit ranking suffers. Defaulting on student loans consequences are quite bad as it spoils your chances of getting a loan ever again unless you clear the present defaulted loan. There are many ways in which one can regularize their loan and bring it back to the repayment status. If the student loan is a federal loan, then the consequences become harsher. Once the loan is in default, the government starts to garnish ones disposable salary. This means that they take away 15% of the debtors disposable salary every month.
Since 15% will not pay for the full loan amount, the government withholds the debtors tax returns. Also, if the borrower fails to pay the entire loaned amount by the time he retires, he will lose all retire benefits like Social Security but, the government can withhold only 15% of the benefits. If the borrower or person in debt has more than one asset, the government can seize the assets, till the loan is paid in full.
If a collection agency in involved in the repayment of defaulted loans then things can get worse as the collection agency charges 25% of the total loan amount. So, if a considerable amount is due, it could spell trouble for the debtors. Another scary fact is that if you hold a professional license, (example: doctors, lawyers, teachers, etc) the government has full right to seize it, if you have not paid up.
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