Consequences of Default

Many borrowers do not fully understand the consequences of allowing their student loans to enter a defaulted status. As a result, payments are often not made with the urgency required and many options, such as loan consolidation or income dependent repayment plans, are not pursued.

Following are just some of the situations you may find yourself in should you default on your federal student loans:

  • Ineligible for payment arrangements (entire balance is due in full).Default
  • Ineligible for deferment or forbearance.
  • Negative impacts to credit bureau report. 
  • Ineligible for certain federal loans or grants.
  • Up to 15% of  wages may be garnished.
  • Sued for repayment (liens may be placed against assets).
  • Federal and state refunds (e.g. tax refunds) may be withheld.
  • Up to 25% in collection fees may be added to the loan balance.
  • Loans may be referred to collection agencies.
  • There is no statute of limitations on defaulted student loans.