The Consequences of Defaulting on Student Loans

The definition of default is not making payments on your student loans after 270 days and not making arrangements for deferment or forbearance.

You have accumulated a lot of student and loan debt and have yet to get that “million dollar” job. As a student, you are responsible for repaying your loans even if you move, ignore your monthly repayment bill, did not graduate, or have trouble finding a job after graduation. Also, student loans are NOT discharged through bankruptcy.

After a few weeks, you may receive creditor phone calls and notices. Your lender or servicer will make at least four phone calls and send four notices before sending a final demand letter (usually sent after five months of non-payment). The fifth letter will emphatically tell you that you pay immediately, and then a default claim will be filed on your loan.

Because you originally did not make an effort to repay your loan or apply for a deferment you have now established for yourself bad credit. Once you have bad credit, you are ineligible to receive a credit card, mortgage, apartment or car loan.

The Ramifications of Defaulting on Student Loans

  1. Your tax refunds may be withheld and used for payment.
  2. Part of your salary may be withheld if you work for the federal government.
  3. You may be sued and taken to court for the entire loan amount.
  4. You may be required to repay your debt under an income contingent repayment plan and thus repay more than the original principal and interest on your loan.
  5. You will not be able to obtain additional state or federal student aid until you make satisfactory arrangements to repay.
  6. You will be ineligible for deferments.
  7. You may not be able to renew a professional license.

Refinance your student loan

 

Repayment Topics