How Do I Know If My Student Loans Are In Default
If you’re having trouble paying back your student loans, it can be hard to tell if you’ve gone into default. You may not have realized what was happening until it was too late, and now it’s time to take action.
But how do you know if your student loans are in default? What do you need to do next? We’ll walk you through the steps of figuring out whether or not your student loans are in default, and then we’ll give you some tips on what to do next.
What Is Student Loan Default?
Student loan default is when a borrower stops making payments on their student loans. If a borrower has a federally guaranteed student loan, they must go through a process called rehabilitation before they can get out of default and make payments again. The process involves applying for an income-driven repayment plan and making nine consecutive on-time monthly payments—or else they will remain in default forever!
Why Should You Care?
The consequences of being in default are serious and long lasting: potentially ruined credit scores, garnished wages and tax refunds, collection calls—the list goes on. But there’s also another reason: if you have federal student loans, they cannot be discharged by bankruptcy filing unless certain
How Do I Know If My Student Loans Are In Default
If you aren’t sure if your student loans are in default, the easiest way to find out is to check with your servicer. If you aren’t sure who that is — or aren’t ready to have a conversation with them about your loans — you have a couple of other options.
Log in to studentaid.gov. All federal student loan borrowers have a My Federal Student Aid account they can access with their FSA ID. Sign in to your account, select a loan and look at its repayment status to see if it’s listed as in default. Your account also includes information about your servicer, if you need it.
Pull your credit report. Your credit report will list federal and private student loan defaults under the negative information section. You can get a copy of your report for free once a year at annualcreditreport.com.
These resources may not be updated in real-time, so your loan could be in default and not show up as such. Confirming your loan’s status with your servicer is your best bet.
Understanding Default
If your loan continues to be delinquent, the loan may go into default. The point when a loan is considered to be in default varies depending on the type of loan you received.
For a loan made under the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan Program, you’re considered to be in default if you don’t make your scheduled student loan payments for at least 270 days.
For a loan made under the Federal Perkins Loan Program, the holder of the loan may declare the loan to be in default if you don’t make your scheduled payment by the due date. Find out where to go for information about your Perkins Loan.
If you defaulted on any of your federal student loans, contact the organization that notified you of the default as soon as possible so you can explain your situation fully and discuss your options. If you make repayment arrangements soon enough after your loan has gone into default, you may be able to resolve the default quickly. Learn more about getting out of default.
loan default consequences
The consequences of defaulting can not only impact your ability to borrow but can impact your finances as well. Consequences include the following:
The entire unpaid balance of your loan and any interest you owe becomes immediately due (this is called “acceleration”).
You can no longer receive deferment or forbearance, and you lose eligibility for other benefits, such as the ability to choose a repayment plan.
You lose eligibility for additional federal student aid.
The default is reported to credit bureaus, damaging your credit rating and affecting your ability to buy a car or house or to get a credit card.
It may take years to reestablish a good credit record.
You may not be able to purchase or sell assets such as real estate.
Your tax refunds and federal benefit payments may be withheld and applied toward repayment of your defaulted loan (this is called “Treasury offset”).
Your wages may be garnished. This means your employer may be required to withhold a portion of your pay and send it to your loan holder to repay your defaulted loan.
Your loan holder can take you to court.
You may be charged court costs, collection fees, attorney’s fees, and other costs associated with the collection process.
If your school withholds your official transcript, upon your request the school must provide you with an unofficial transcript that might be accepted by another institution. If you are struggling to get your transcript from your school, submit a complaint to the Consumer Financial Protection Bureau