what are the consequences of paying only a percentage of my monthly student loan payment?
November 19th, 2009
pedra_gray asked:
For example: My monthly student loans are $500. I can only afford to pay $250 – $300. Can wages still be garnished? Will it reflect negatively on my credit, even though it’s a “good faith” attempt to pay a debt?
For example: My monthly student loans are $500. I can only afford to pay $250 – $300. Can wages still be garnished? Will it reflect negatively on my credit, even though it’s a “good faith” attempt to pay a debt?
If you are in school you can ask if you can “hold” payments until your schooling is complete. Maybe you can also refinance for a lower interest rate and estend the terms.
You need to talk to your creditor and negotiate this. Simply paying this amount will still reflect late payments, and hurt your credit. But if you can negotiate a new payment plan things may be worked out.
If they don’t accept it, then technically you are in default on the loan and they could sue you, and then garnish wages.
When you call, have your current income and budget ready, so you can explain your financial situation to them. Just remember, it’s not as easy as telling them you plan to file bankruptcy. Student loans can not be discharged through BK, and they know it. And there is no SOL on it either. So they have all the negoation cards here…just be honest and see what they can do to help you out.
A couple significant consequences are that it’ll reflect poorly on your credit report that you can’t fulfill your debt obligations. Future lenders will see this if you apply for a loan, etc. Also, if your student loan is from a government agency, you probably won’t be able to get any other government loans.
Contact the lender and see if you can re-negotiate the terms of the loan. Maybe decrease the monthly payment to $200 and extend the maturity of the loan.