Defaulting on Your Student Loan - Default
If you default on your student loan, your loans may be turned over to a collection agency. You will be liable for the costs associated with collecting your loan and this would include court costs and attorney fees. The creditor may decide to sue you for the entire amount of your loan plus costs. They would also be able to garnish your wages. (Federal law limits the amount that may be garnished to 15% of the borrower’s take-home pay.)
We strongly you to take the time to read the U.S. Department of Education’s Guide to Defaulted Student Loans - it likely has all the information your seeking and then some.
They can also intercept your federal and state income tax refund. The federal government may withhold part of your Social Security benefit payments as well. The US Supreme court has upheld the government’s ability to collect monies owed from student loan default in this manner without a statute of limitations.
In addition, your defaulted loans will appear on your credit record making it difficult for you are to obtain an auto loan, mortgage, or even credit cards. A bad credit record can also harm your ability to find a job. Did you know many employers will pull your credit before offering you a position?
Furthermore, you will not be able to receive any further federal financial aid until the loans have been paid in full or you can make arrangements to repay what you already owe. You would also need to show good standing records of payment for a least six consecutive on time monthly payments. This would also make you ineligible for assistance under most federal benefit programs.
At this point, you would not be eligible for any kind of deferment and federal interest benefits will be denied. So getting a student loan consolidation would almost be impossible. This could also stop one from renewing a professional license you hold.
Once a student loan goes into “default” status, the full balance of the loan becomes due immediately. It also means that other options for delaying payment, including student loan deferment and forbearance, can no longer be used.
Eventually, unpaid defaulted student loans can have long-term consequences beyond just the loan directly. For example, your credit report will take a hit. Once the loan has been forwarded for collection, your wages can be garnished and your federal income tax refunds can be withheld. You also lose your eligibility for other types of federal loans.
Obtaining a student loan consolidation for your defaulted loans into a new loan will show that your old defaulted loans have been paid in full. You will sign a new promissory note, and be able to start from scratch! With only one lender to deal with and one monthly bill, you will find it easier than ever to manage your debt. Also, get reinstated with Deferment and Forbearance options.
A Federal Consolidation Loan is a federally backed loan that allows parents and former students to consolidate qualifying federal education loans into a single loan, reduce monthly payments, choose a flexible repayment plan, and lock in today’s low rates for the rest of their term. It is free to apply for student loan consolidation and does not require any credit checks.
When you have decided to consolidate, your loans there are many sites out there to research. Find what is best for your financial situation. If it is not going to help, you do not do it. There just simply would be no point.