What Happens If I Default on My Student Loan?

Are you feeling overwhelmed by the thought of student loans and the fear of defaulting on them? Defaulting on your student loan can have serious consequences that can affect your credit, and financial opportunities, and create additional hardships. When you default, the government or lender may use aggressive tactics like wage garnishment and seizing tax refunds to collect the debt.

What Happens If I Default on My Student Loan?
What Happens If I Default on My Student Loan?

To avoid default, it’s important to take proactive steps such as setting up an affordable payment plan based on your situation. If the average monthly payment of $390 is unmanageable, consider options like income-based repayment plans or loan consolidation to lower payments and provide some relief.

If you do end up defaulting, there is still hope. You can negotiate with your lenders or explore programs like public service loan forgiveness or loan rehabilitation. It’s crucial to research and seek assistance from organizations like the National Consumer Law Center to resolve the issue efficiently.

What Is A Student Loan Default?

Let’s start with the basics. A student loan default is a situation where you fail to make your scheduled loan payments as outlined in your loan agreement. In other words, it’s like missing the due date on your monthly bills, but in this case, it’s your student loan payments. These assumptions are of various kinds depending on the type of loan.

Federal Student Loan

Federal student loans are considered default, when loan payments are 9 months or 270 days past due. Some federal loan options can go into default immediately if you don’t make a scheduled payment before the due date.

Private Student Loans

Private student loans are due three months or a total of 90 days after default. Therefore, you should check your loan promissory note for details, as some private loans default after late payments.

What Happens If I Default on Federal Student Loans?

There are many consequences when you stop paying your federal student loans. This is if you have not made payments for at least 270 days.

These consequences are;

  • There are many consequences when you stop paying your federal student loans. This is if you have not made payments for at least 270 days. These consequences are:
  • You have to pay off all your outstanding student loan balances and all outstanding interest promptly. This is the acceleration process.
  • If you default on your federal loan, you lose access to federally protected benefits like deferment and forbearance.
  • When you default on your federal student loans, you lose the opportunity to choose a repayment plan that works for you and lose the ability to change your student loan repayment plans. Also, you lose access to income-based payment plans.
  • If you default on your federal student loans, you may no longer be eligible for federal student aid.
  • Before your federal loans become delinquent, you must notify all three credit bureaus that you have no credit for 90 days. Also, it can negatively affect the situation, making it difficult to get a car loan, credit card, or mortgage.
  • Your tax refund and federal benefit payments are withheld or garnished to pay off the outstanding balances of your student loans through the Treasury Offset process.
  • You may face legal issues such as a lawsuit filed by your creditor in court. In addition to your loan debt, you may have to pay court fees and other costs.
  • The university or college may withhold your transcripts and other required documents, making it difficult for you to be accepted to other schools in the future.
  • You may not be able to buy or sell real estate.

What Happens If I Default on Private Student Loans?

Private student loan defaulters face different consequences than federal loan defaulters. Therefore, you must follow the rules and regulations of private lenders. Remember that defaults are different for every borrower.

Default on Private student loans if you miss payments for 90 days or more. You can also default on your student loans by filing for bankruptcy, defaulting on other loans, or dying.

If you fail to pay for 90 days or more, a default will be reported to the credit bureaus. Also, if you default, your debt will be turned over to a collection agency.

  • As with federal loans, your lender can sue you in court, which can mean additional costs like court fees and interest.
  • Just like with federal loans, your credit score will suffer. And a poor credit score can haunt you for years to come.
  • Private lenders can also send your loan to a collections agency. These agencies can be even more aggressive than their federal counterparts.
  • If you somehow manage to get back on track with your payments, your lender may increase your interest rates, making it even harder to repay the loan.
  • Private lenders can take legal action against you as well. This could result in wage garnishment, and they might even go after your cosigner if you had one.

In essence, defaulting on private student loans can lead to a world of financial pain, and it’s something you should avoid at all costs.

What Do I Do When I Am Defaulting on My Student Loans?

Alright, so what should you do if you find yourself in a situation where you’re struggling to make your student loan payments, and default seems like a looming possibility? Here are some steps to consider:

Step1: Contact Your Lender

The first thing you should do is reach out to your lender. Sometimes, they can offer you temporary relief, like forbearance or deferment, which can give you some breathing room.

Step 2: Consider Loan Consolidation

If you have multiple federal student loans, consolidating them into one can make your payments more manageable. It won’t, however, lower your interest rate.

Sept 3: Income-Driven Repayment Plans

For federal loans, there are income-driven repayment plans that base your monthly payment on your income and family size. This can significantly reduce your monthly burden.

Step 4: Refinance (for Private Loans)

If you have private loans, consider refinancing. This involves taking out a new loan with a private lender to pay off your existing loans. It can result in a lower interest rate and more manageable payments.

  • Seek Professional Help: If your situation is dire, consider consulting a student loan counselor or financial advisor. They can provide guidance on your specific circumstances and help you make a plan to get back on track.
  • Don’t Ignore It: Whatever happens, don’t just leave it and hope the problem goes away. It won’t. Ignoring your loans can lead to default, and as we’ve discussed, that’s not a good place to be.


Defaulting on your student loans is a situation you definitely want to avoid. It can damage your credit, lead to legal action, and cause a lot of financial stress.

The key is to stay proactive. If you’re struggling with your loan payments, reach out to your lender and explore your options.

There are ways to make your loans more manageable and keep your financial future on track. Remember, it’s your financial well-being at stake, so take control and make informed choices.



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