Default On Federal Student Loan

Default On Federal Student Loan

Defaulting on a federal student loan is not an easy task. However, you can avoid the consequences of defaulting and even get your loans back in good standing if you follow the right steps.

Defaulting on a federal student loan means you failed to make payments on your loan according to the terms of your promissory note (the document signed when taking out a loan). If you default, the U.S. Department of Education or guarantee agency can:

Defaulting on a federal student loan means you failed to make payments on your loan according to the terms of your promissory note (the document signed when taking out a loan). If you default, the U.S. Department of Education or guarantee agency can:

• Take up to 15% of your wages
• Keep your federal student aid eligibility and make it more difficult for you to ever receive aid again
• Sue you in court and take legal action against any assets that may have been used as collateral for the loan, including property and vehicles

In some cases, the government can even report bad debts to credit bureaus.

Take your tax refund and up to 15% of your wages

The IRS allows you to take your tax refund and up to 15% of your wages. You can choose to have this money go toward paying down student loans, and it will be reflected on your credit report as a loan payment.

Keep your federal student aid eligibility

You can still receive federal student aid if you default on a federal loan. However, you will be required to make payments on your defaulted loans before receiving federal student aid.

If you are eligible for a repayment plan and do not enroll in one within 30 days of your starting school or leaving school, the lender will report your account as delinquent to the National Student Loan Data System (NSLDS). Once reported as delinquent by the lender, NSLDS breaks down into two categories:

• You owe a balance greater than $150; and/or 2) The institution did not certify that you were enrolled at least half-time during the most recent payment period (even if this was due to financial hardship).

These reports go through several steps before they become official: 1) They are sent directly from NSLDS through email and snail mail; 2) You have 15 calendar days after receipt to dispute any information contained therein; 3) If no disputes are filed within 15 days then all negative consequences associated with not paying off one’s debt may ensue including garnishment of wages and seizure of property such as cars or homes.”

Sue you

If you are having trouble repaying your federal student loans, you may consider filing for bankruptcy. Bankruptcy can stop the collection of your debt and discharges (eliminates) most or all of it. However, there are some important things to know before filing for bankruptcy on defaulted federal student loans:

• If you file under most chapters, including Chapter 7 and Chapter 13, you will still owe the government anything that is left after paying off other creditors. This means that if your income is low enough to qualify for a chapter 7 discharge (which happens when all debts except child support and certain taxes are discharged), but not low enough to qualify for an income-driven repayment plan (also known as an IBR), then any remaining balance due on your federal student loan will be discharged upon completion of the case.
• If a borrower files under Chapter 13 and pays back some portion or all of his/her unsecured debt through a three-to-five year payment plan approved by court order—but fails to pay back any portion or all of his/her secured debt (like home mortgages)—then upon completion of his/her case he/she can expect that those secured debts will become due immediately without further notice from their original lenders or servicers.

Report you to credit bureaus

Defaulting on a federal student loan has serious consequences. When you default, the government can take your tax refund and garnish your wages. It can also initiate legal action against you, including having a lien placed against your property or filing suit against you in court.

To avoid these consequences:

• Make payments on time every month – interest will not accrue during periods in which payments are made on time;
• Contact your lender if you have trouble making payments; and
• Consider alternatives such as deferment or forbearance if necessary

There are consequences for defaulting on a federal student loan. Find out how to avoid them and what to do if it’s too late.

If you default on a federal student loan, this means that you failed to make payments on your loan according to the terms of your promissory note (the document signed when taking out a loan). There are consequences for defaulting on any type of federal student loans and state student loans.

If you are in default, there are several actions that can be taken against you by the Department of Education (DOE), including:

• Collection costs
• Interest charges
• Administrative fees

Learn about the consequences of defaulting on a federal student loan.

You will be charged a default fee of up to 16% of the principal and interest on your loan.

You will not be able to receive any more federal student aid until you repay the defaulted loan.

You may not be able to get a job with the federal government or a license from any state agency (including bar exam eligibility).

Now that you know what happens when you default on a federal student loan, what if it’s too late for that? You can take steps to repair your credit and get back on track. First, contact the lender who has your loan to find out how long it will take before your account is considered “in good standing.” Then start making payments on time each month until it’s resolved. If you’ve already lost credit due to defaulting on loans—or just want help getting started—contact a credit counselor at http://www.mycreditunion.org/support/borrower-network-members/credit-counselors/.