The Consequences of Student Loan Default
Allowing student loans to go into default can have serious financial consequences that can affect your credit for years to come. Here’s what you need to know:
- Direct Federal Student Loans are in default when they reach 270 days past due
- Family Federal Education Loans are in default when they are 330 days past due
Once student loans are in default, the consequences can be long-lasting. Here is some of what can happen:
- The entire outstanding balance, including interest, becomes due immediately.
- Loans are no longer eligible for deferment, forbearance or student loan forgiveness.
- You can no longer choose a repayment plan.
- Any tax refunds or federal benefit payments you are eligible to receive can be withheld to pay the outstanding balance.
- Your wages can be garnished, meaning your employer will be required to withhold a portion of your pay to go toward the defaulted loan.
- The default is reported to the credit bureaus; this will hinder your ability to obtain additional credit.
In addition to these immediate consequences, you may:
- Be prohibited from purchasing or selling real estate.
- Be responsible for paying collection fees, attorney’s fees, court costs and other expenses related to the collection process.
- Your school may withhold your academic transcript.
- It can take years to rehabilitate your credit.
Ideally, you will address your student loan challenges before the loans go into default. But if they reach this stage, student loan rehabilitation is one of the options to get back on track. You can read more about student loan rehabilitation here.
Additionally, Student Loan Counseling can help you find a manageable solution for your student loan debt. You can also use our Student Loan Payoff Calculator to estimate how long it will take to pay off your student loan debt.