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Defaulting on Student Loans

By Elisa Kronish

September 04, 2008

Missing payments on your student loan has serious consequences. If you’re making monthly payments and you’re 270 days delinquent, or 330 days delinquent if you pay less often than monthly, then you are in default.

Your Borrowing Responsibilities

It’s important to read the fine print when you borrow money for school. Unless you’re granted loan deferment, forbearance or forgiveness, you must repay your loan as scheduled. Even if you don’t finish school, if you can’t find a job or if you were unhappy with your education, you still must repay your loan. You must also attend an exit interview before you leave school and notify your school of changes to your name, address or phone number.

Short- and Long-term Effects of Defaulting

Significant short-term effects of defaulting may include delay in class registration, and holds on transcript requests and receipt of diplomas. Your loan may also be accelerated, which means payment will be demanded immediately in full.

The list of long-term effects is even greater. A loan default will be reported to national credit bureaus and can damage your credit rating for a minimum of seven years. Poor credit can prevent you from financing a house or a car or getting a credit card.

Defaulting on your loan may also result in:

  • Failure to pass credit checks for job opportunities.
  • Garnishment of your wages.
  • Legal action.
  • Loss of deferment eligibility.
  • Withholding of your federal and state income tax refunds.
  • Refusal for any additional federal aid.
  • Possible ineligibility to renew a professional license you’ve earned.

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