Loan Default

Loan default means that a student who received an educational loan fails to make payments in compliance with the promissory note he or she signed and as federal regulations dictate.

Default Prevention

In some cases you can prevent defaulting on your loan(s) due to personal or educational circumstances (see deferment list). However, the responsibility for filing a deferment is yours. Filing a deferment is not automatic; you must initiate such action with the proper agency or servicer.

Default Consequences

To an extent, default is a matter of choice. The borrower either actively makes a decision not to repay his or her loan, or does not take appropriate steps on his/her own behalf regarding a loan payment deferment. In either case the borrower breaks a legal and binding contract with the federal government. The ramifications of not repaying an educational loan are economically painful and often personally embarrassing, and can include:

1. Cancellation of your federal tax refund to repay your loan(s);
2. Negative Credit rating report to Credit Bureaus;
3. Cancellation of all future student financial assistance;
4. If you are employed, your wages could be taken in part to repay your loan debt;
5. Collection agency activities could embarrass you at home and at work;
6. Your entire loan must be paid in full, immediately.

Once this process begins against you, it is legally difficult, if not impossible, to stop.

Federal Education Loan Default

• If you're in default on a federal education loan, you may be able to receive a Direct Consolidation Loan.