Student Loan Default Non Payment of Student Loans

Obviously, no one ever wants their student loan to default. The list of repercussions is long, and recovering from a student loan default is very difficult. If you fail to make payments on your student loans in accordance to your promissory note, or the legal document you signed in order to pay for your education, you will be in default.

The financial institution(s) that holds your loan, your loan guarantor, and the federal government can all take legal action against your in order to recover the money you owe. Below are some of the consequences should you default on your contract to repay:

  • The entire balance of both principal and interest will become due and payable.
  • Your credit rating will reflect the default which will make it very difficult to get another loan when you want or need to buy a car or a home.
  • Any deferment options you have will be lost
  • Should you decide to return to school and further your education, you would be ineligible for any additional federal student assistance.
  • A lean can be placed on any of your assets including your paycheck
  • Tax refunds can be applied toward the amount you owe.
  • In addition to what you owe, you'll also pay late fees and collection fees.
  • You can be sued.
  • You might be ineligible to work for some employers that run a credit check on new employees.

Student loan defaults should be avoided at all costs. If you find yourself in a hardship do your best to manage the payments and consider a student loan consolidation. A student loan consolidation will lower your monthly costs and reduce the interest you owe. But, you need to apply for the loan before going into default.

With a student loan consolidation, you'll retain most all the rights and benefits of the original loan such as deferment, grace period and hardship.

Please know that should you find yourself in a financial problem and you're not able to pay your student loan. The amount you eventually pay will be significant. Also, when the loan holder does receive payment, that amount is applied to collection fees and interest first. If the money received is more than these fees, then the remaining money is applied to the principal amount of the loan.

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