What happens if I default on a student loan?
Updated October 6, 2022
If you default on a student loan, the consequences are severe. Here are a few examples of what may happen to you if you default:
- You lose eligibility for any additional federal student aid.
- You lose eligibility for deferment, forbearance, and repayment plans.
- Your loan will be reported as delinquent to credit bureaus, damaging your credit rating (This will affect your ability to buy a car or house or to get a credit card.)
- The IRS can take your federal and state tax refund to collect any of your defaulted student loan debt.
- Your student loan debt will increase because of the late fees, additional interest, court costs, collection fees, attorney’s fees, and any other costs associated with the collection process.
- Your employer (at the request of the federal government) can withhold money from your pay and send the money to the government. This process is called wage garnishment.
- It will take years to reestablish your credit and recover from default.
If you have defaulted on a student loan, contact your loan servicer or collection agency right away to explain your situation and find out your options for getting out of default. Â You may have several options including loan repayment, rehabilitation, or consolidation.
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