What is Default?
Default occurs when a borrower persistently fails to make timely payments on their loan as required, to provide documentation or to notify the lender of other relevant conditions that cause them to be unable to pay any loans they have under federal loan programs. Default will seriously harm your credit rating, and your income taxes and/or wages may be withheld, along with other serious consequences.
Your loan(s) will be assigned back to the appropriate agency that administered your loan.
How can Default Impact You?
Defaulting on your federal student loan is a serious matter. It affects your credit rating and can cause numerous problems for you in years to come. For example, some employers will check your credit history before hiring you. A default can prevent you from getting a loan to buy a car or a house. The consequences of the failure to repay the loan include a damaged credit rating for at least seven years, loss of generous repayment schedule and deferment options, and possible litigation against you and/or any endorser/co-maker/co-borrower on your loan. In the event of default, your guaranty agency purchases the loan from your lender and begins collection activity against you. This activity may include (but is not limited to):
- Continued contact with you by the collection agency until your loan is fully paid
- Reporting your default to a credit bureau
- Loss of eligibility for further Federal Title IV student assistance
- Tax refunds can be intercepted
- Garnishing your wages
- Loss of repayment options
- Contacting your loan's endorser/co-maker/co-borrower for payment in full
- Legal action that may result in judgments, asset seizures and property liens
- Withdrawal of your state issued license or certification
- Exposure to civil suit
- Being held liable for collection costs and attorney fees