Student loans are serious financial obligations. Defaulting on a loan can impact your financial life for many years to come with serious repercussions. Find out what happens if you go into default.
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by Brette Sember, J.D.
Brette is a former attorney and has been a writer and editor for more than 25 years. She is the author of more than 4...
Updated on: January 2, 2024 · 3 min read
Student loans can seem like an easy way to afford college, but they can be a huge burden after you graduate if you are unable to pay them back. What happens if you default on student loans can have an impact on the rest of your life.
Student loan default does not happen immediately. When you miss your first payment, you are delinquent on your student loan. When you are 90 days behind on your payments, the student loan servicer will report your loan as delinquent to the credit reporting bureaus. For most loans, default actually happens when you have not made a payment in 270 days. The distinction is important because of the legal consequences that can come with default on student loans.
When you are late paying your student loan, you may have trouble being approved to rent an apartment, getting a cell phone plan, signing up for utilities, or applying for other credit. Your credit rating is damaged by late payments and may result in you not qualifying for credit or being charged higher interest rates.
What happens if you don’t pay student loans is a long list of serious repercussions. Student loans cannot be discharged in bankruptcy, so all of the following possibilities are real risks.
Fortunately, there is student loan help available for those who are in default. One option is Public Service Loan Forgiveness (PSLF) Program. If you work in certain specified public service jobs for ten years, your loan will be forgiven. The other avenues to student loan forgiveness are the Income-Based Repayment (IBR) plan, Pay As You Earn (PAYE) plan, or Income-Contingent Repayment (ICR) plan. These programs generally cap your payments at 10-20% of your discretionary income. Once you have made a certain number of payments, the entire balance of the loan can be forgiven.
While defaulting on your student loan is a serious situation, there are a variety of ways to pay your loan and guard your credit rating. Understanding your options is the first step to protecting yourself and your future.
If you are struggling with student loan debt, find out what options are available to you with a free student loan forgiveness evaluation of your situation. If you are eligible for student loan forgiveness, a student loan specialist will take care of the paperwork.
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