Tempting as it is to hit a pause button on student loan payments, it’s a move that could trigger financial grief — especially if you do it repeatedly.
Borrowers who frequently seek a deferment or forbearance to suspend student loan payments for a time often have a hard time getting back on track. Many end up owing more than their original balances in the long run.
Every year, one million student borrowers default on nearly $20 billion in federal loans. Defaulters are more likely to be older and many have trouble getting out of default, according to a report from the Center for American Progress.
A federal student loan enters default when a borrower fails to make a payment on it for 270 consecutive days, according to the center’s report.
Defaulting on a student loan is serious business because it triggers hefty collection fees, garnishing of your wages, the possibility of the federal government taking your tax refund to cover past-due student loans, and even ineligibility for some other programs, such as help with home ownership.
But taking the wrong road to avoid default also can end up harming some students, too.
Your student loan debt can easily go higher
After five years of repayment, about 21% of borrowers ended up owing more than their original balances, according to the Texas data. Debt grew as borrowers paused payments repeatedly for several years.
“Among borrowers who owed more after five years in repayment, a third had balances of 125% or more of their initial principal,” according to Pew’s research.
So if you started out owing $30,000 in student loans, you could soon owe $37,500 after five years in repayment.
For the original article click here: https://www.freep.com/story/money/personal-finance/susan-tompor/2019/11/06/student-loan-debt-deferment-default-pew-study/4155338002/