It’s true that student loans are great to attain your degrees. However, we can’t deny how the debt makes it difficult to lead a fulfilling life in the near future for many American youths.

A rising loan burden translates to lesser opportunities to save for a home, pay rent or any jump towards any independent venture in future. Moreover, you would hardly have the basic required savings to start your own family. And in case you are default or delinquent on your loan, it would spell disaster for your credit score.

Put simply, lack of control on student debt will go a long way in ruining your future plans and limiting your financial freedom, big time. But then again, student loans should not mean the end of the world — provided you know what routes to take if you get delinquent or default on your loan.

How does this loan debt affect the borrower’s credit?

Akin to any loan, be it auto loan or mortgage, student loans also benefit and harm the borrower’s credit score. If you want to avoid the usual scenario of a rising debt burden, make sure to pay all the required payments on time and in full. Timely payments improve the borrower’s credit score, which consequently portrays him as a credible borrower to future lenders.

Likewise, when you fail to make the due payments on scheduled time, you end up with a poor credit score. And lenders do not prefer borrowers with bad credit, which means borrowing issues for you in near future.

Let me elaborate on the situation.

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Missing or defaulting student loan payments takes a serious toll on the borrower’s overall finances. We have already discussed the difficulties in securing loans or credits in the future with poor credit. Also, a bad credit score will dampen your chances of securing insurance, attaining a standard mobile phone plan and signing up for the utilities. Moreover, it might create issues in the employment sector as well. Some employers prefer to avoid applicants with debt issues. In fact, federal employees with such problems might be denied of their security clearance.

What will happen if the borrower can’t make timely payments?

Well, if you are late by 90 days, you would be tagged as “delinquent” and your status would be reported to three leading credit bureaus. If you have taken a federal student loan and could not make payments for as long as 270 days, you would be declared as “defaulter”.

What are the solutions if you are unable to make your student loan payments on time?

Now, we have reached the most important section of our post — the solutions for late repayments.

First, if you are having a hard time in securing repayments for your student loan debt, don’t go to “default” immediately. In fact, that should be your last resort.

Deferment/Modified Payment Program

A smarter option would be modified payment program or deferment plan. Such a program is beneficial for the borrower, as it can adjust the monthly payments on the basis of his specific income. Deferment enables the borrower to stop the payments for a brief while and it won't affect the credit score.

Loan Forgiveness Program

On the other hand, there are some loan forgiveness programs that will “forgive” the payments if the borrower works in certain careers. These include professions as a teacher or something in public service.

What if you have to default on the student loan?

This is when credit repair companies come to the rescue.

In case, you become a defaulter or delinquent, seek help from credit repair companies. Leading credit repair firms will effectively negotiate with the creditors to mend your credit. They will also make sure the borrower’s credit report stays accurate and fair. The entire proceeding would be done with due respect to the borrower’s legal rights as per the current consumer protection regulation.