Consequences of default

  • Negative marks on your Credit Score
    • This will impact your future borrowing eligibility (including credit cards and other types of loans.)
  • Seizure of Federal Tax Refund
  • Your Employer deducting up to 15% of your paycheck
  • Increased loan balance due to collection costs
  • Lose of eligibility to borrow Student Loans

Definition of Default

  • Failure to make a scheduled payment when due under the repayment schedule established by the institution.
  • Failure to submit to the institution, on or before the date on which the payment is due, documentation that qualifies the student loan for a deferment, forbearance or cancellation provision listed on the loan's promissory note.


  • Assessment of a $8.00 monthly collection charge to your account
  • Delinquency reported to a national credit bureau. A poor credit rating can hamper the possibilities of obtaining loans. If you are planning on financing a house or car in the future, it is essential to remain up-to-date on your loans. Credit ratings usually remain on the Credit Bureau records for at least (6) years following the closing of the loan.
  • Ineligibility for future title IV financial aid. Once a federal student loan enters default status, it is extremely difficult to regain eligibility for additional financial aid.
  • Placement of the loan with a licensed collection agency. Accounts placed with a collection agency are assessed fees that are charged by the agency.
  • Litigation and court costs. Costs of litigation can sometimes be quite high. Per federal regulations, these costs are charged to the student/borrower.
  • Assignment of the loan to the U.S. Department of Education. Our office is not authorized to service any account assigned to the U.S. Department of Education. The deferment and cancellation provisions on the promissory note would no longer be valid. The department of education is also authorized to garnish income tax returns to recover the outstanding balance of assigned student loans.