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What is default?
- Default is failure to repay a loan according to the terms agreed to in the Master Promissory Note.
Why are you in default?
- No payments have been made for more than 270 days.
What are some of the consequences of default?
- You lose eligibility for additional federal student aid.
- Your loan account is sent to collections.
- The loan will be reported as delinquent to credit bureaus, damaging your credit rating and it will take years to reestablish. This will affect your ability to buy a car, house, or get a credit card.
- Your federal and state taxes may be withheld to collect any of your default student loan debt.
- At the request of the federal government, your employer can withhold money from your pay and send the money to the government. This process is called wage garnishment.
How to Avoid Default
Very few of our students default on their student loans and we’d like to help you avoid this situation as well. If you are having trouble paying your student loans, you can contact our Financial Aid Administrator. She will help you understand your options and help you contact your loan servicer.
But there are some things that you can do as a student and after graduation to help prevent you from defaulting on your student loans:
- Keep track of all your loan information by regularly visiting the National Student Loan Database (NSLDS) at nslds.ed.gov.
- Manage your borrowing by creating a budget to determine how much you really need to borrow.
- Notify your loan servicers when you change your personal information.
- Complete Exit Loan Counseling to choose a repayment plan that is best for you. If you do not choose a repayment plan when you complete exit loan counseling, you will be assigned the standard repayment plan.
- If you are unable to make payments, contact your loan servicer to discuss your forbearance or deferment options.
What can I do to get out of default?
There are three options to help you get out of default: repay the loan in full, rehabilitate your loans, or consolidate your loans.
Repayment in Full:
- To repay your loan in full, you will have to contact the collection agency in charge of your loan and make a payment directly to them. To get the contact information for the collection agency, please log into studentloans.gov using your FSA-ID. Their information is provided in the loan detail summary.
- To rehabilitate a defaulted loan, will need to contact the guaranty agency. You will need to make nine monthly payments within 20 days of each due date and all 9 payments must be made consecutively.
- Depending on your income, your monthly payments under rehabilitation could be as low as $5 a month.
- Once your loans have been rehabilitated, your loans will be in good standing. You will regain eligibility for benefits, such as, deferment, forbearance, loan forgiveness, and additional student aid.
- You can only rehabilitate a defaulted loan once.
- Loan consolidation allows you to pay off one or more federal student loans with a single new loan that has a fixed interest rate.
- Interest for the new loan is based on the average of all the loans you are consolidating.
- You must select an income-driven repayment plan and provide documentation of your income.
- Although consolidation is one of the fastest way to clear a defaulted loan, it does not remove the record of the default from your credit history.
- If you have questions about loan consolidation, you can call 1-800-557-7392.
For more information on student loan default, please visit the Federal Student Aid Understanding Delinquency and Default page at: https://studentaid.ed.gov/sa/repay-loans/default .