Student loan defaults: What are they & what do they mean?

By Dominique Jeter (TheLorian)

Student loans are a reality almost every student will have to deal with after graduation. During the COVID-19 pandemic, loan defaults were modified, as they are every year, to a particular interest rate. Most colleges participate with loan defaults, including Loras College. Loan defaults occur when a student’s payment is late by 270 days, or nine months. A chain reaction is likely to occur, including calls from the student’s lender or debt collection agency that is responsible for collecting unpaid debt. However, there are some differences with loan defaults and a private loans.

If you default on your federal student loans, the first things a you’ll lose is protections and benefits like deferments, forbearance, access to flexible repayment plans, and loan forgiveness. Defaulting on a private loan can also leave the student and the student’s cosigner with negative consequences.

 In the United States alone, there is $1.67 trillion in national student loan debt, which means the on average a student is borrowing about $29,067 each. Surprisingly, the student loan default rate has dropped to 9.70 percent compared to last year’s when it was 10.10 percent. There are colleges, universities, and institutes that are at risk of losing their federal funding due to having default rates of 30 percent or higher. Some of those schools are Arkansas Baptist College, United Tribes Technical College, and Cleveland Barber College, to name a few.  Those institutions happen to be for profit institutions, meaning that they are a corporation and possibly have shareholders.  

Loras ranks number thirteen in default rates out of all the other schools that are Iowa. Our default rate is a 3.20 percent right now, which puts Loras at a rank of 740 out of the 4,398 colleges and universities across the nation. To put in layman’s terms, it is rated from the lowest to the highest default rates. As a college, Loras does their best to make it financially affordable to attend this college while working to obtain your degree.  

Here are some ways that you can avoid defaulting on your student loans: 

  1. Contact your loan servicer or the provider.  

Note: If it is a private loan the provider can be the school, Sallie Mae, etc.  

  1. Research income driven repayment plans.  
  1. Consider refinancing your student loans. 

(You may not want to pay less for a longer amount of time but this is better than defaulting on your loans!) 

  1. Do not bite off more than you can chew! Pay what you feel is comfortable and right but do not overpay and struggle later to keep up with those payments.  
Google+ Linkedin

Leave a Reply