What happens if I default on a federal student loan?

If the owner of your loan does not receive your payments for 270 days, the owner will take steps to put the loan in default and try to collect it. Our Debt Collection Rule, which clarifies certain provisions of the Fair Debt Collection Practices Act (FDCPA), became effective on November 30, 2021.

“Default” or default is failure to pay a loan according to the terms agreed in the “promissory note” or promissory note. On most federal student loans, you will default if you fail to pay for more than 270 days.

If you haven’t paid your federal student loan for 270 days (nine months) and you haven’t made an arrangement with the lender or servicer that doesn’t require you to make those payments (such as a deferment or deferment), you’re probably in breach.

During the months that you do not pay your loan, the servicer of the same must exercise “due diligence” or due process, and try to collect it, it must make repeated efforts to locate you and contact you to talk about the payment.

If you have not received a letter from the servicer and you think you may be in default, contact the servicer immediately. Ask what payment options exist and find out if it is possible to avoid default.

Once your federal student loan defaults, you could face a number of consequences:

  • Your wages could be garnished without a court order
  • You may lose your tax refund or Social Security check (the funds would be sent to your defaulted student loan)
  • Credit reporting agencies will be notified and your credit score may be affected

You may not receive any additional federal student aid if you have any federal student loan in default until you have taken steps to get it out. The Department of Education’s Back to School Guide has more information on this topic.

If you are behind on your federal student loan and have been contacted by a collector, you may be able to work out some payment options to get out of default. What Happens If I Don’t Pay My Student Loans?

What should I do if I can’t pay my student loans?

Given this new reality, what should I do if I can’t pay my student loans?

I work in the hotel and tourism industry. A few months ago my job became very unstable for obvious reasons. For now, my finances are under control, I have no credit cards and my accounts are up to date. But soon I will have to start paying off my student loans and I don’t know if my industry will recover before that happens. Given this new reality, what should I do if I can’t pay my student loans? 

Dario,  Florida

Beatriz Hartman talks about the alternatives available when you can’t pay your student loans

There are several alternatives in case you cannot pay your student loans. The first thing to do is talk to your creditor

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student loans

Getting federal student loans doesn’t require good credit, but paying them off can have a big impact on your performance. If you pay on time, you can help build credit right out of school, but if you run into trouble, it could end up hurting your credit score.

Learn the ins and outs of how student loan payments affect your credit score and how to make sure payment problems don’t drag your numbers down.

Did you know that students in the United States owe more than $1.5 trillion in student loans? The average student graduates with $26,000 in debt. Does anyone wonder why 40 percent of people default on their student loans in the first five years?

Student Loan Debt Consolidation

Student loan debt has replaced credit cards as the second largest source of debt for most Americans.

Challenges with student loan debt can hamper your personal finances, damage your credit, harm your income through wage garnishment, and prevent you from achieving your goals, such as starting a family or buying a home.

The following information can help you understand how to consolidate your student loans. If you have questions or need help finding the right resources to get out of debt, we can help.

Although student loan consolidation should be separate from credit card debt consolidation, we can put you in touch with a student debt consolidation specialist who can help.

Student Loan Debt Consolidation»

Suspension of student loan payments due to the pandemic

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides relief for people who have federal student loans.

  1. Most federal student loan payments have been placed on administrative forbearance, which means you are not required to make any payments until September 30, 2020.
  2. If you made payments or had payments deducted from your bank account since March 13, when the law went into effect, you can request a refund.
  3. If you choose to make payments between March 13 and September 30, 100% of the payments you make will go toward paying off the principal balance. The interest rate on all qualified loans is currently 0%.
  4. For borrowers with delinquent loans, the Department of Education will not take collection action.

It is important to note that not all federal student loans qualify for the benefits listed above. Old loans taken through the Federal Family Education Loan (FFEL) Program and Perkins Loans taken through a school do not qualify.