It is no secret that the student loan crisis in the United States is reaching a tipping point, as these financial situations are bad news for everybody involved. Not only will it take decades for student loans to be completely paid off, it also harms banks and other lenders when a person has to default or cannot make their necessary payments on time.
According to experts, of the people who fail to make a student loan payment, nearly 20 percent miss the very first one they owe. There are a variety of reasons for this to happen, whether the reasoning entails unemployment, insufficient funds, or simply losing track of when the payments are due because of a move or starting a new job.
Payment history makes up more than a third of a person's FICO score, so missing a payment can harm your credit score, as well as damaging future relationships with your bank. More than 40 million Americans across the country have a form of student loan debt, and every last one needs to know the pitfalls to avoid when making payments.
Here are some mistakes that can be made when it comes to student loan and debt:
- Ignoring any financial problems: When people fall behind on their payments or fall on some kind of financial hardship, the tendency is for them to stick their heads in the sand and not confront the issue directly. This is a bad way to go about things, as the federal government can garnish wages until debts are paid off, and private lenders can turn the matter over to their collection services. If something should go wrong, the best course of action is to visit the financial institution to work out a solution.
- Missing necessary payments: As we said above, missing payments can have a detrimental impact on the credit of an individual. This means that making the payments in full and on time is a crucial step in the process, no matter how much money you need to budget for these payments each month. Having automatic payments set up to a debit or credit account that links to the financial institution is a great way to make sure that the payments never come in late.
- Not knowing how much is owed: The basic issue that many face when it comes to their student loans is not knowing how much money they owe in the first place. After graduation, it is the best course of action to sit down and plan out how much you will begin to pay each month to reduce your debt as quickly as possible.
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