Understanding Defaulted Student Loans
What is default?
To default means you failed to make your payments on your student loan as scheduled according to the terms of your promissory note.
How is missing a payment a problem?
Your loan becomes delinquent the first day after you miss a payment. The delinquency will continue until all payments are made to bring your loan current. Loan servicers report all delinquencies of at least 90 days to the three major credit bureaus.
How do I avoid default?
If you are having trouble making payments on a student loan you should contact us immediately at 866-319-2101 or contact your loan servicer, the agency that handles the billing and other services for your loan.
What should I do if my loan is in default?
If you have defaulted on any of your federal student loans, take the following steps:
What are the consequences of default?
The consequences of default can be severe:
- The entire unpaid balance of your loan and any interest is immediately due and payable.
- You lose eligibility for deferment, forbearance, and repayment plans.
- You lose eligibility for additional federal student aid.
- Your loan account is assigned to a collection agency.
- The loan will be reported as delinquent to credit bureaus, damaging your credit rating. This will affect your ability to buy a car or house or to get a credit card.
- Your federal and state taxes may be withheld through a tax offset. This means that the Internal Revenue Service can take your federal and state tax refund to collect any of your defaulted student loan debt.
- Your student loan debt will increase because of the late fees, additional interest, court costs, collection fees, attorney’s fees, and any other costs associated with the collection process.
- Your employer (at the request of the federal government) can withhold money from your pay and send the money to the government. This process is called wage garnishment.
- The loan holder can take legal action against you, and you may not be able to purchase or sell assets such as real estate.
- Federal employees face the possibility of having 15% of their disposable pay offset by their employer toward repayment of their loan through Federal Salary Offset.
- It will take years to reestablish your credit and recover from default.
We can fix your defaulted student loans. To learn about your options contact us at 866-319-2101
Understanding Default | Federal Student Aid