Defaulting on a student loan can have adverse impacts to your financial stability for many years to come.
If you are taking out a student loan for your educational purposes, it is important to consider how your long term financial future can be impacted should you opt to default on the loan due to financial burden.
While there are many adverse events that occur when default on a student loan takes place, one of the most profound effects may come with the impairment to purchase a home.
While we are typically forewarned of potential issues associated with wage garnishment and seizure of tax refunds, many of the student loan documents we review do not state how the default of a loan can impact your ability to own a home one day.
Under federal financial assistance programs for home buyers, a default on a student loan will negate your eligibility for home loans, and mortgages, under programs such as HUD, FHA, and even the VA programs.
It is important, therefore, that you are clearly able to repay student loans so as to avoid the potential risk of not qualifying for a home loan at a later date.
While there are many other creative ways to purchase a home when you have defaulted on a student loan, most lenders will require that you clear up your student loan default status before a home loan can be given.
In addition, if your student loan goes into default, your home may be one of the assets that is subjected to seizure as part of the student loan repayment.
Taking out student loans is often a necessity in order to get the education we desire.
But, if you are unable to pay for your student loan after you have finished school, there are many financial risks to be faced. Becoming familiar with these risks, including the risk of not being able to buy a home, will be important to your long term financial future.
Before defaulting on a student loan be sure you have spoken with the lender about other options for repayment and consider forbearance or deferment before a default takes place.