Know What You Should Consider About Student Loans Before Getting This Debt

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Obtaining a university education opens many doors and constitutes an invaluable tool for professional and personal growth. However, it can become an expensive process that escapes the possibilities of many families, especially in the economic situation that crosses the Island today. This is where student loans , sums of money granted by the federal government, or private institutions come into play in order to meet the costs of a university career; which the student must then pay with interest.

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Universia Puerto Rico spoke with Jessica E. Méndez Colberg , a lawyer at the Emmanuelli Law Firm , who explained everything a student should know before hiring such credits.

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Types of loan
When you apply for a loan , you have two options to turn to, a public body , the Federal Department of Education, or a private institution such as a bank or other financial institution. For Mendez Colberg, going to the federal government is the most convenient for students, since it offers "varied alternatives of payment plans, debt forgiveness benefits and loan consolidation and rehabilitation programs, which are covered by federal legislation" .

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Private institutions, on the other hand, lack these benefits, so the debtor is subject to what the institution is willing to offer in terms of payment plans: "if the private institution is not willing to grant a payment plan other than already established, are not obliged to do so. "

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Another feature that differentiates loans from each other is whether they are loans for the regular academic year or for periods of summer, winter or for periods after graduation. You should keep this in mind before you take out the loan, since the grace period - the time you have before you start paying - is not necessarily the same for a regular loan as for another type of loan, interest and "the time since the interest starts to accumulate", indicates Méndez Colberg. Generally, the loan is due after six months after graduation.

Before applying for the loan
Before committing to a student loan, counsel recommends, in addition to always choosing a federal loan, "avoid at all costs" those who require the signature of a co-debtor , your parents or other legal guardians, as these loans " they do not enjoy the same payment plan benefits as regular loans, so the alternatives for modifying payments are quite limited. " "As a general rule, a student loan does not require credit verification, nor does the signature of a co-debtor," she says.

What happens if you take out a loan and then you can not afford it?

According to the experience of Mendez Colberg, many students are unable to meet their unemployment payments: "many people take more than 6 months to get a job" and in others "the income received is not enough" to cover the fees and in addition to defending the personal maintenance.

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Failure to meet the monthly installments can bring various consequences for the debtor. If the student misses the payment deadlines, the loan goes into delinquency, while if more than 270 days elapse without any payment being made, it is in default.
As soon as the loan falls into delinquency, this is reflected negatively in the credit of the debtor , which can prevent or impair his ability to apply for credit cards, mortgage loans and any other request for financing. Then, if the loan goes into default, a collection agency will take care to do everything possible to receive the corresponding payments: "they make incessant calls, both to the debtor, their relatives, reference contacts and places of employment. The letters of notification on non-compliance and collection procedures are also incessant, "warns the lawyer.

The most serious consequence of non-compliance would be the foreclosure of immovable or movable property. That is, if you do not comply with the loan, the Federal Government can keep your home, your car and even your bank account or your salary "without a court order." In addition, you are prevented from re-applying for other student loans, among other complications. However, according to Méndez Colberg, "there are many alternatives to prevent the student loan from falling into default, and that should always be the objective of the debtor."

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"There are many alternatives to prevent the student loan from falling into default, and that should always be the objective of the debtor"

How to avoid falling into default
According to the expert, many people "are unaware of the possibility of establishing payment plans more comfortable than the payment plan that is established in a standard way once the loan is demandable" and for this reason can not avoid falling into default.

Instead of exploring payment alternatives, some debtors simply ask for extensions, one after another, which causes interest to accumulate and the debt to be higher.

If after applying for a loan you find it difficult to meet your payments, Mendez Colberg recommends consulting with a lawyer or a knowledgeable practitioner, as often the companies that manage the loans "do not necessarily have the staff available, the enthusiasm, incentives or the time to guide the debtors. "
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