Consequences of Default
Students who do not repay their federal education loans face serious consequences.
· Credit will be adversely affected, making future credit purchases (car, home, etc.) more costly
· Lose the privilege of monthly payments; the full amount of loan (plus any fees or collection charges) becomes due immediately
· May be sued by the federal government
· Wages and/or entire tax refund may be garnished (taken) to pay the loan balance
· Collection charges (at least 18.5%) will be assessed, increasing the payoff amount. The charges will be taken off the top of any post-default payments.
o For instance for every $1,000 a borrower pays, at least $185 will go to collection charges
· Attorney fees may be applied to the balance owed
· Loss of eligibility for additional federal student aid
· Belongings may be repossessed to pay back the loans
· May lose the option of deferment and forbearance
· May not be eligible for certain federal and/or state jobs
· May lose a professional license (in some jobs)
The cost to the U.S. Department of Education of paying off default claims also reduces the amount of aid that can be given to other students.
Avoid default by making payments, applying for a deferment or forbearance, or changing repayment plans.
Created: May 04, 2011 @ 03:57 PM
Last Modified: May 04, 2011 @ 04:17 PM