What Does Defaulting on a Student Loan Mean?

If you’re thinking of defaulting on your student loans, it’s important to understand what that could mean for your future. Here’s a look at the consequences of defaulting on a student loan.

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Defaulting on a student loan has serious consequences that can lead to damaged credit, wage garnishment, and difficulty securing additional financing in the future. If you’re struggling to make your student loan payments, it’s important to understand what default is and what you can do to avoid it.

What is Default?
Default occurs when you fail to make your student loan payments according to the terms of your promissory note. If you’re in default, your lender can take steps to collect the money you owe, including wage garnishment, withholding tax refunds, and intercepting other federal payments such as Social Security benefits. In addition, defaulting on your student loans will damage your credit score, making it difficult to qualify for additional financing in the future.

What are the Consequences of Default?
The consequences of default are serious. In addition to damaging your credit score, defaulting on your student loans can lead to wage garnishment, withholding of tax refunds, and interception of other federal payments such as Social Security benefits. Your loan balance may also increase because of late fees, collection costs, and interest that continues to accrue on your unpaid balance. In some cases, your employer may be required to withhold a portion of your wages to repay your debt.

How Can I Avoid Default?
There are several things you can do to avoid default on your student loans:
-Make sure you understand the terms of your promissory note before you sign it.
-Keep track of when your payments are due and make sure you pay on time.
-If you’re having trouble making payments, contact your lender as soon as possible to discuss alternate payment options.
-If you’re considering deferment or forbearance as an option for reducing or suspending your payments, make sure you understand the terms and conditions before you apply.
-Consider consolidating your loans into one monthly payment that fits within your budget.

The Consequences of Defaulting

Defaulting on your student loans has serious consequences. Not only will it damage your credit, but you will also owe more money in the long run. The government can also take legal action against you. If you are struggling to make your payments, there are other options available to you.

Your Credit Score

Your credit score is one of the most important factors in your financial life. It is used by lenders to determine whether or not you are a good candidate for a loan, and it can also affect your interest rates and your ability to get a job. A low credit score can lead to higher interest rates, higher insurance premiums, and even being denied for a loan.

Defaulting on your student loans can have a negative impact on your credit score. It will likely stay on your credit report for up to seven years, and it will make it difficult to get a loan during that time. Defaulting on your loans can also make it difficult to find a job, as many employers check credit scores as part of their hiring process. In short, defaulting on your student loans can have serious consequences for your financial future.

Collection Actions

If you default on your student loans, the entire unpaid balance of your loan and any interest you owe becomes immediately due and payable. In addition, you will lose eligibility for deferment, forbearance, and repayment plans. You will also no longer be able to receive additional federal student aid.

The government can take aggressive collection actions against you, including wage garnishment, deduction from your federal and state tax refunds, and seizure of your assets. Your credit rating will also be seriously damage, making it difficult to buy a car or a home or to get a job.

Getting Out of Default

Loan Rehabilitation

Loan rehabilitation is a process by which you and your loan holder agree to a repayment plan to get your loan out of default. To qualify for loan rehabilitation, you must make nine voluntary, on-time, monthly payments of an agreed-upon amount within 20 days of the due date during 10 consecutive months. The monthly payment amount is based on your total annual income, your family size and state of residence, and the type of loan that’s in default. If you’re not working or not earning enough money to make monthly payments, you might be able to rehabilitate your loans by making reduced monthly payments or agreeing to a new repayment plan based on your current income.

Loan Consolidation

Loan consolidation is one way to get out of default on a federal student loan. When you consolidate your loans, the government pays off your defaulted loan and issues you a new Direct Consolidation Loan. To be eligible for loan consolidation, you must:
-Be current on payments for any Direct Loans or FFEL program loans that are not being consolidated.
-Not have an outstanding balance on a Direct or FFEL program loan that is being consolidated.
-Agree to repay your Direct Consolidation Loan under the income-driven repayment plan or another repayment plan you qualify for.

If you consolidate while you’re in default, your default status will be removed from your credit report, and you’ll be able to make payments on your consolidating loan under a new repayment plan. If you’re not currently in default but are close to defaulting, consolidating now may help you avoid default.

Loan Forgiveness

Loan Forgiveness
If you are unable to repay your loans, you may be eligible for loan forgiveness. Loan forgiveness is when the government agrees to cancel all or some of your student loan debt. To qualify, you must work in certain jobs or for certain employers. For example, you may qualify if you work full-time for a government or not-for-profit organization. You may also qualify if you enter and complete a service obligation, such as teaching in a high-need field.


In short, defaulting on a student loan has serious consequences. It can damage your credit score, making it difficult to borrow money for a car or a home. It can also lead to wage garnishment, meaning the government can take money out of your paycheck to repay your loan. If you’re struggling to make your student loan payments, contact your lender or servicer immediately to discuss your options.

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