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David Pereiras/Shutterstock July 27, 2022 Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more. Chelsea has been with Bankrate since early 2020. She is invested in helping students navigate the high costs of college and breaking down the complexities of student loans. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Student loan default happens when borrowers fail to pay their student loans according to the loan terms. Of course, there’s a big difference between paying a few days late and letting your student loans go completely. Where a late payment may be easier to overcome, true default comes with consequences that can last for years. What is student loan default
Student loan default is when your student loan goes unpaid for a number of months. When you fail to make a payment on your student loan by the payment due date, your loan moves into delinquent status. At that point, your student loan will remain delinquent until you pay the amount you owe, you qualify for deferment or forbearance or you change your repayment plan. Once your student loan payment is at least 90 days late, your loan servicer will report your delinquency to the three credit bureaus — Experian, Equifax and TransUnion. At that point, your loan will transition from delinquency to default on a different timeline depending on the type of student loans you have. With , your loan is usually considered in default when you don’t make your scheduled payments for 270 days. One exception is Perkins Loans, which can be considered in default if you miss a single payment. With , you are usually considered in default after you miss three monthly payments, or 90 days total. How do I know that my student loans are in default
If your student loans become delinquent or past due, you will likely be notified by your loan company or servicer. You may receive a notice in the mail, a call from your servicer or an email with details on your late payment, but it could depend on the process you normally use to pay your student loan bill. If you let your student loan payments become several months past due, you should anticipate them being in default in the near future. Once your student loans are in default, you should see them listed on your credit reports, which you can see for free from all three credit bureaus using the website . You can also log into the to see the status of your federal student loans, including any information on past-due, delinquent or defaulted amounts. How does default affect me
There are many consequences that can arise from letting your student loans go into default, and the damage to your credit score can take years to repair. Here are some examples of why you should avoid student loan default at all costs: With federal student loans, defaulting can lead to the entire unpaid balance of your loan and any interest you owe becoming immediately due through a process called “acceleration.” When you default on federal student loans, you are no longer eligible for deferment or forbearance, nor can you change your repayment plan at that point. Federal student aid is not available to students who default on their loans. With federal or loans, your loan holder can take you to court. Your wages could be garnished. Your default will be reported to the credit bureaus, which can lead to considerable damage to your credit score. Late fees and interest will continue to accrue on your debts, meaning the problem only gets worse. You will likely be on the hook for court costs, collection fees, attorney fees and additional costs associated with the collection process. Your school could withhold your academic transcript until you get your student loans out of default. What happens if I default on my student loans
If you default on your student loans and never take steps to turn your situation around, you could face all of the consequences listed above. Unfortunately, the results of this financial misstep can impact your ability to get approved for anything involving a soft or hard credit check. If you have poor credit due to defaulting on your student loans, for example, you may not be able to qualify for a credit card, borrow money to purchase a car or take out a mortgage to buy a home, regardless of your income. If you are able to get approved for consumer credit, you’ll likely also pay a higher interest rate and more fees than someone whose credit score is in good standing. Additional consequences of defaulting on your student loans could include difficulty in signing up for utilities or qualifying for reasonable homeowners insurance rates. You might even have trouble getting a cellphone plan or qualifying to rent your own place without a co-signer. How do I get my student loans out of default
If you’ve already defaulted on your student loans, there are ways to get them back in good standing. Federal student loans
Since March 2020, collection activity has been on hold for defaulted federally owned student loans or grant overpayments. This temporary relief is set to expire on Dec. 31, 2022, but the Education Department has said that it will allow all borrowers with defaulted federal loans or delinquent payments to reenter repayment in good standing in January. Outside of this temporary relief, there are three main ways to get your federal student loans out of default: paying your entire loan balance in full, pursuing loan rehabilitation or applying for loan consolidation. Since most people cannot afford to pay their loans off in one big chunk, rehabilitation and consolidation are the only options most can consider. With federal loan rehabilitation, you start by contacting your loan servicer. When you rehabilitate a federal Direct Loan or FFEL loan, you must: Make nine affordable monthly payments (as determined by your loan holder) within 20 days of the due date and agree to these terms in writing. Make all nine of the agreed-upon payments during a period of 10 consecutive months. The monthly payment you make under loan rehabilitation is typically equal to 15 percent of your monthly discretionary income. According to the , discretionary income is “the amount of your adjusted gross income (from your most recent federal income tax return) that exceeds 150 percent of the poverty guideline amount for your state and family size.” Because of the way loan rehabilitation payments are determined, your loan amount during the rehabilitation process could be as low as $5 per month. With federal loan consolidation, you get the chance to combine your existing federal student loans into one new one. To qualify for this plan for defaulted loans, you must do one of the following: Repay your new Direct Consolidation Loan under an . Make three consecutive, voluntary, on-time, full monthly payments on the loan in default before the consolidation takes place. Private student loans
The rules are different for . If you have private student loans in default, you may be able to on your debt in collections. You could also try to work with your loan servicer to get back up to date, which you can facilitate by reaching out and explaining your situation. Many individuals with private student loan debt they cannot manage also wind up reaching out to a student loan lawyer for help. Next steps
Once you have taken steps to get your student loans out of default, it’s important to avoid making the same mistakes again. Your best move is making sure that you have a monthly payment that you can afford without financial hardship. You can do this by: Looking into income-driven repayment plans that let you pay a percentage of your discretionary income on your loans for 20 to 25 years. in order to secure a lower interest rate and a more affordable payment. Choosing among federal student loan repayment plans (for existing federal loans), which may let you repay your loans for up to 30 years. Also make sure that you set yourself up for success when it comes to planning for your student loan payments. This can mean starting a monthly budget that helps you plan for each of your bills and your average expenses, but it can also mean cutting discretionary spending so you have more wiggle room in your budget each month. Finally, you can also consider setting up your student loan payments to be sent in automatically so you never forget to pay. Frequently asked questions about student loan default
Can I dispute student loans after 7 years
While it’s possible to and have the information removed, negative marks based on unpaid student loans will . Student loans are notoriously difficult to discharge in bankruptcy, and disputing them on your credit reports is not going to help, either. Your best bet is making sure that your payment is affordable and paying what you owe, no matter how long it takes. However, you should keep in mind that some can help you wipe away your debt sooner rather than later. What happens if I cannot repay student loans
If you cannot repay your student loans at the moment, you may want to look into federal . Both let you pause your student loan payments while you get back on your feet. Interest may still accrue during this time, but either type of relief can buy you time. While there aren’t as many options for private student loans, borrowers with these loans can reach out to their lender for hardship relief options and alternative repayment plans. Can you go to jail for student loan default
Generally speaking, you cannot go to jail for defaulting on your student loans. However, your lender can and likely will sue you, your credit score could take a significant hit, your wages could be garnished and you could end up owing a lot more in fees and interest over the long run. SHARE: Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more. Chelsea has been with Bankrate since early 2020. She is invested in helping students navigate the high costs of college and breaking down the complexities of student loans. Related Articles