Consequences of Default

Defaulting on your student loans is a serious financial situation. To default is to fail to make several regular payments on time or to fail to meet the terms and conditions of your loan.

Once your student loan goes into default, the college or university, loan holder, state government or federal government can take legal action to recover the money. Defaulting on a student loan will also make you ineligible for future federal financial aid and can affect your credit rating.

Other consequences of default include:

• You become ineligible for any loan forgiveness or payment relief.
• Reports of default are made to all national credit bureaus, which will affect your ability to buy a car or house, get a credit card or get other loans in the future. If you do get a loan or credit, the interest rate and finance charges will be much higher.
• The loan servicer can demand immediate payment in full.
• A lawsuit can be brought against you.
• Your account can be turned over to a collection agency, which can have a negative impact on your credit report.
• Your guarantor can garnish your wages, which means your employer will be forced to take money out of your paycheck until your debt is paid in full.
• Your guarantor can collect any federal or state tax refunds due to you, to satisfy your student loan debt. They can also collect any money you win from a state lottery, as well as any Social Security and Veterans benefits.
• If your profession requires a professional license from your state, your guarantor may be able to keep you from receiving your license.
• Your guarantor may sue you for repayment. If that is the case, you may also be responsible for the guarantor’s legal fees.
• As a last resort, your guarantor may assign your defaulted loans to the federal government, which can take the same steps, but at the federal level.

If you need assistance in avoiding default, call Iowa Student Loan now at (800) 243-7552 to speak with a loan counselor.