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Default Management

If you have received a student loan or are considering loans to help pay for your education please read this. Below you will find helpful resources, frequently asked questions regarding loans and loan repayment. You may also want to visit our financial literacy page. This information is provided to help you determine if loans are the right option for you and provide you with tools to manage your finances, including budgeting to repay your loans.

Helpful Resources:

  • Know your loan repayment amounts: Estimate your future monthly loan repayment cost using the Federal Student Aid Repayment Calculator.
  • Know your loan repayment options: There are several repayment plans available, here is an overview of Direct Loan and FFEL Program repayment Plans, you can also contact you loan servicer for more information.
  • Know the starting salaries in your field: You can use the U.S. Department of Labor's Occupational Outlook Handbook to estimate salaries for different careers or research employment opportunities advertised in the area where you plan to live to get an idea of a local starting salary.

Frequently Asked Questions:


What is default?

To default means you failed to make your payments on your student loan as scheduled according to the terms of your promissory note, the binding legal document you signed at the time you took out your loan.

How is missing a payment a problem?

Your loan becomes delinquent the first day after you miss a payment. The delinquency will continue until all payments are made to bring your loan current. Loan servicers report all delinquencies of at least 90 days to the three major credit bureaus. A negative credit rating may make it difficult for you to borrow money to buy a car or a house (you will be charged much higher interest rates). You also may have trouble

  • signing up for utilities,
  • getting home owner's insurance,
  • getting a cellphone plan, or
  • getting approval to rent an apartment (credit checks usually are required for renters).

It is important to begin repaying as soon as you receive a bill. Keep track of your student loan and learn how to manage your loan repayments.

How do I avoid default?

If you are having trouble making payments on a loan from the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan (FFEL) Program, immediately contact your loan servicer, the agency that handles the billing and other services for your loan.

If you are having trouble making payments on your Federal Perkins Loan, immediately contact the school where you received your loan.

Whether your loans are delinquent now or not, you should read our tips to help you avoid default.

What should I do if my loan is in default?

If you have defaulted on any of your federal student loans, take the following steps:

What are the consequences of default?

The consequences of default can be severe:

  • The entire unpaid balance of your loan and any interest is immediately due and payable.
  • You lose eligibility for deferment, forbearance, and repayment plans.
  • You lose eligibility for additional federal student aid.
  • Your loan account is assigned to a collection agency.
  • The 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.
  • Your federal and state taxes may be withheld through a tax offset. This means that the Internal Revenue Service 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, attorneys 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.
  • The loan holder can take legal action against you, and you may not be able to purchase or sell assets such as real estate.
  • Federal employees face the possibility of having 15% of their disposable pay offset by their employer toward repayment of their loan through Federal Salary Offset.
  • It will take years to reestablish your credit and recover from default.