Preventing Default – Consequences of Default
If you miss several payments on your loan and it becomes 270 days past due, your loan will be considered in default. Failure to repay your loan may result in any or all of the following:
- Report of the default to all national credit bureaus, resulting in adverse credit reports which may affect your ability to obtain financing for cars, houses, etc.
- Report of the default to the Internal Revenue Service, causing federal tax refunds to be withheld and applied to the loan balance (this is also true for state tax refunds)
- Garnishment of your wages
- You will be charged collection costs and other costs necessary to collect debt. Your loan will be assigned to a collection agency
- Loss of other federal or state payments
- Loss of eligibility for further assistance from any Title IV Program
- Loss of eligibility for repayment options, deferments and interest benefits as described on the Promissory Note
- Denial of access to academic transcripts
- Denial of professional licenses (in some states)
- Liability for court/legal expenses
Rights and Responsibilities of Student Loan Borrowers
1. I am obligated to repay my Loan(s), including all accrued interest and deducted fees, even if I do not complete the program, cannot find employment or I am dissatisfied with the program of study.
2. I have a maximum of ten years to repay my loan(s) unless I choose to consolidate my loans.
3. I may repay all or part of my loan(s) without penalty.
4. The minimum monthly payment is $50. The payment may be larger depending on the amount borrowed. I will begin to repay my loan(s) after the 6-month grace period.
5. The interest rate of my loan(s) is specified in the Notice of Loan Disclosure and Guarantee Statement that will be sent after the loan application is processed.
6. I must notify my Lender or Holder of my loan(s) within 10 days if I:
- Change my name
- Change my address/phone number
- Change my graduation date
- Transfer to another college/university
- Enroll for less than or drop below half-time (drop below 6 hours)
- Withdraw from school
7. I will be notified in writing if my loan(s) is transferred to a new holder.
8. I must direct all correspondence to the new holder.
9. If I qualify for a deferment, I will contact my lender or holder of the loan(s) to apply.
10. If I do not qualify for a deferment, but I am unable to make monthly payments, I must contact my lender or holder of the loan(s) and request a forbearance.
11. If I do not repay my loan(s), I will be considered in DEFAULT, and the following may result:
- It will be reported to National Credit Bureaus and have a negative effect on my credit rating.
- The entire unpaid balance plus interest will become due immediately.
- I will be ineligible to receive any additional Federal Aid.
- My wages and Federal and State income tax return will be garnished.
- In some states practicing licenses will be revoked.
Last updated: 1/23/2013