Defaults on Student Loans

You can take steps to avoid defaulting on your student loan. Before you get the loan, determine how much money you need to borrow and only borrow that amount. When you get the loan, make certain that you understand the details such as the payment terms and what type of loan you have. Once your student loan becomes due:

• Maintain accurate records of your loan, including the loan agreement, interest rates, and account numbers.
• Track your loans to stay updated on how much you owe.
• Make certain that the loan servicer has your current contact information and bank account (if payments are withdrawn automatically).

If you default, it means you failed to make payments on your student loan as scheduled. Your loan becomes delinquent the first day after you miss a payment. However, the loan isn’t in default until 270 days have passed without a payment. The consequences of default can be severe, including:

• The entire unpaid balance of your loan and any interest is immediately due and payable.
• Your loan account is assigned to a collection agency.
• The loan will be reported as delinquent to credit bureaus, damaging your credit.
• 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 employer can withhold money from your pay and send the money to the government. This process is called wage garnishment.

If you are having difficulty making your payments, contact your loan servicer immediately. The servicer may be able to help by changing your repayment plan, switching the due date, getting a deferment or forbearance, or consolidating your student loans. The Federal Student Aid Information Center has more information about these consequences and how to avoid defaulting.