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How Younger Adults Can Avoid Defaulting on Loans

Youth is no excuse for defaulting on a loan. At some point, perhaps after graduation, the loan payments will begin. How a young person manages student debt can be crucial. "Other loans, such as credit cards, and high living expenses can make it tough for a student or graduate to pay off college loans," Daniels cautioned. "The non-payment of a student loan is a bad way to start your career because your credit report will be damaged and the ability to obtain new credit or even qualify for certain jobs may be jeopardized."
To help stay out of trouble, he recommends getting a job, setting and sticking to a budget that includes money for loan payments, and building an emergency savings fund (see Build your own rainy-day fund and borrow from yourself). But what if your good intentions fail and you have no way of making a payment? Contact the lender immediately. "Many lenders would rather work out some modified payment plan than have the borrower stop making payments completely," said Kirk Daniels, a supervisor in the FDIC's consumer affairs section.