The Ins and Outs of Defaulting On A Student Loan Repayment Program

Good For Your Pocket It is not

Even if your student loan repayment assistance fails - don't default on the repayment of your student loans. It's not worth it. Why Not ? What is it ? What are the consequences?

LOAN DEFAULT occurs when a loan is considered delinquent for over 270 days. When a student loan enters the default status, many consequences are likely to result. It pays to shop around for financing, and to know your lender and to fulfill their requirements as the ramifications of your actions can last for many years. Some consequences of loan defaulting are listed below :

- The loans may be turned over to a collection agency. Collection costs of up to 42% are possible on top of the defaulted balance.
- The borrower will be liable for all the costs associated with collecting the loan. This may even include the court costs as well as attorney fees.
- The borrower can be sued for the entire amount of the loan.
Wages may be garnished.
- The federal and state income tax refunds may be intercepted.
- That federal government may withhold part of the Social Security benefit payments.
- Defaulted loans can be recorded on the person’s credit record. This makes it difficult for the borrower to get an auto loan, mortgage and credit cards. Having a bad credit record can also harm reduce the chances of finding a job.
- The borrower’s will be possibly denied federal financial aid until he or she repays the loan in full or makes arrangements to repay what is owed and make at least six consecutive, on time, monthly payments.
- Federal interest benefits will be denied.


Federal student loan borrowers holding defaulted student loans are generally not entitled to any deferments or forbearances.
Without federal aid, a loan defaulter may be forced to take a semester off. It is difficult to survive without federal student aid; and to afford the cost of higher education independently.
What’s more, there is a great possibility for those borrowers who default on their student loans to lose their professional licenses. For instance, lawyers who possess defaulted loans may be subject to have their license to practice law removed. Doctors and certified public Accountants may also fall into this category.


Lastly, the borrowers who just ignore summons for loan repayments will become liable for all fees associated with collecting the federally financed loan. This means that they will end up repaying their outstanding debt, plus substantial contingent fees in order to satisfy the student loan debt.
Note that this rule is actually consistent with the Higher Education Act as well as present on the terms of most borrowers’ promissory notes. Check all documentation associated with your loan, especially eligibility, payment dates and amounts due including interest alterations.


To avoid all these difficulties and to give yourself the best opportunity, staying in touch with your loan servicer and let them know if you're having trouble with payments or other difficulties. Watch change of addresses and change of credit card and bank details as you may not be recieving valuable documents or actually making payments. If unsure at any time contact the loan servicer. They may be able to assist you in many more ways than you realize and set you on a better path towards financial solvency. Why not give yourself every opportunity !