Borrow protection programs are put in place to offer students a few alternatives if they are finding it difficult to repay their student loans. However, not all lenders treat student borrower protection the same way. When it comes to any aspect regarding student loans, never take anything for granted. Always ask and preferably, get the answers in writing.
The most important question to ask your student loan lender about borrower protection is…
“What happens if I fail to make a student loan payment for 270 days?”
If you don’t make any loan payment for a period of 270 days, your student loan will then go into default. Most lenders do not deal with default student loans directly. They hand it over to guaranty agencies. These are companies that are authorized to collect on defaulted student loans.
Student Loan Default
Once your defaulted loan goes over to a guarantee agency for collection, you will have to bear the agency’s fees. This could be anywhere between 18%-40% of the balance amount as collection fees, which can add to your total debt substantially.
A few lenders, but not all, may settle the issue without any additional fees if the default is resolved quickly. To avoid any unpleasant surprises, it is important to ask your student loan lender about borrow protections in advance.
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