What happens if I default on my student loan?

Defaulting on a student loan has significant consequences that impact both the borrower and their financial future. When a borrower defaults, it typically means they have not made any payments for an extended period, usually around 270 days for federal student loans. This status can lead to a series of repercussions that can be quite serious. Firstly, the borrower may face damage to their credit score. A default will appear on their credit report and can lower their credit score considerably, making it more challenging to secure future loans or credit. Additionally, the borrower can lose eligibility for federal student aid, which could impede their ability to pursue further education. Moreover, the loan will be sent to a collections agency, which can result in aggressive collection efforts. This often includes wage garnishment, where money is deducted directly from the borrower’s paycheck, or the government may intercept tax refunds and federal benefits to recover the loan balance. Interest and fees may continue to accrue, increasing the amount owed. There are also legal consequences, as lenders may sue for repayment, adding further expenses to the borrower. Fortunately, there are options available for those who may find themselves in default, such as loan rehabilitation or consolidation. These programs can help borrowers regain control of their loans and begin making payments again. It is advisable for borrowers facing difficulties to explore these options and seek information on the latest guidelines on the Studentloans.gov website. This can provide them with the most accurate resources and support available.