Consequences of Default

If you fail to make payments on your student loan according to the terms of your promissory note, you will default on your loan(s). Your school, the bank or lending institution that made or owns your loan, your loan guarantor, and the federal government will pursue you for the money you owe. Here are some consequences of default:

• Credit bureaus will be notified of your default, which will make it hard to obtain future financing for purchases like a car or a house.
• You will be ineligible for additional federal student aid if you decide to return to school.
• Loan payments can be deducted from your paycheck.
• Your state and federal income tax refunds can be withheld.
• Late fees and collection costs will be added to what you already owe
• You can be sued.

A defaulted student loan can be rehabilitated, consolidated, stretched out, or discharged due to disability, but cannot be discharged in bankruptcy. For more information and to learn what actions to take if you default on your loan(s), see the Department of Education’s Default Resolution Group Web site.