student loan default
Nobody likes student loans but they have increasingly become the only way into higher education for most American families and students paying their own way. You go to school, get a degree, and within 6 months have to start paying back all the money you borrowed, with additional interest and without the promise of a job. 
It can be a nightmare, especially if your monthly payments are extravagant. 

But there is a silver lining to taking out student loans. When handled correctly and responsibly, loan repayment can build your credit score, allowing grads to qualify for car loans, credit cards, even an apartment. But realistically, things happen. Our jobs don't always pay as much as we’d like. We need a place to live, a car, to support our families. If you are unable to make your monthly payments on-time, know you are not alone. 13.7 percent of borrowers are currently in default. While taking out student loans is a necessary evil for most of us, the consequences of defaulting on your educational loans can be horrific.

1. Non-Stop Harassment in Your Personal and Professional Life


The toll of defaulting on student loans is not just financial, but extends into your personal and professional life. The constant collection letters and daily phone calls you will receive will not be limited to the loan holder but to co-signers, even your employer can be notified, especially if the government requests a portion of your pay sent to cover your debt. If you are a teacher, lawyer, healthcare worker, or work in any position that requires professional licenses, most states have the power to cancel those licenses, rendering you helpless to find work.

2. Garnished Wages and Tax Returns


Student loans are not dischargeable, not even in bankruptcy. This means no matter your financial hardship -- jobless, homeless, broke -- your student loans aren’t going anywhere. Expect both your federal and state tax refunds to be seized if you don’t make payments for 9 months and enter default. If those refunds aren’t sufficient to cover the amount owed, your social security, disability and retirement benefits will be seized next.  The federal government can also take up to 15% of your paycheck, first applying the garnished wage to pay debt collection fees, interest and then the principle of your debt.

3. Effect on Credit Score


Your credit score is a number used to determine a borrower’s creditworthiness and will follow you for the rest of your life. When you fail to pay your loan on-time or at all, you are sure to face serious impediments. Defaulting on student loan repayment can take years to mend. In the meantime,
  • Good luck renting an apartment or opening a bank account
  • Your interest rates for existing loans will skyrocket and future loans will be denied all together
  • It will be nearly impossible to get a mortgage, car loan, or even a credit card
  • Employers in many states reference a potential employee's credit score before deciding whether or not to make an offer of employment

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4. Fees & Higher Interest Rates


When your student loans go into default, the first thing that will happen is called “acceleration.” This means that your TOTAL LOAN BALANCE, including interest will become due in full immediately. The balance will be assigned to a collection agency, whose service fees will be added to the total amount owed.  

5. No Additional Student Loans


Default means all eligibility for future student loans, financial aid and grants will go right out the window. For those looking to go back to school, it won’t be an option. You will no longer be eligible for loan deferment, forbearance or flexible repayment plans.

6. Loan Holder Can Take Legal Action Against You


Depending on who your student loans are through, the federal government or private loan holders have the right to sue you. All court costs, attorney fees and any other expenses during the loan collection process will be added to the amount owed. When this happens, loan holders can actually freeze and garnish from your bank account.

Being poorly organized can make it easy to end up in default. There are loan documents to file and forms to sign. There are due dates to keep track of as well as knowing the expiration of your grace period. There are repayment options and government sponsored programs, but between all of the fine print to determine eligibility, the poorly organised government websites and undereducated loan servicing personnel, it’s almost impossible to find the right program for you on your own.

Student Debt USA has made it our mission to take the burden of student loan forgiveness, student loan consolidation and help troubled borrowers find the best way to pay off student loans. While paying off your student loans as quickly as possible would be ideal, it’s not exactly practical for a country struggling with over $1.3 trillion in student loan debt. Because so many people don’t know how much help is available to them, our nation is falling further and further into debt. There are many repayment programs available to help borrowers who are having a hard time keeping their head above water. To see if you qualify, check out   

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