Paying off a student loan is a great way to develop a good credit history. Timely loan payments are critical. If you are having difficulty repaying your loan due to unemployment, a temporary financial setback or another problem, contact your loan servicer to find out about your options.
A defaulted loan is serious. If you default, it means the lender has turned your loan over for collection and the entire amount is due and payable. Once you are listed as being in default on a student loan, no financial aid of any form will be available to you. To rectify this, you must contact your lender immediately to determine what steps they will require to resolve this issue. Normally, if a person makes six on-time, non-garnished, monthly payments, they may qualify to apply to have their loans rehabilitated. If this is approved, a student can then reapply for financial aid. With nine (9) full, voluntary, on time payments (no later than 20 days after the due date) within 10 consecutive months, they may qualify to apply to have their loans then taken out of defaulted status. Consequences of having a loan in default include:
- A damaged credit rating
- Court action or litigation
- Garnishment of state and federal tax refunds and state lottery winnings
- Wage garnishment and attachment of property
- Loss of additional student aid eligibility
- Loss of deferment and monthly repayment options
- Assessment of collection costs
- Possible effect on professional licensing
- Inability to attain federal student financial aid at any institution.