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Defaulted Student Loan Consequences
I’ve fielded many questions from concerned students of late regarding their federal loans and what happens if they default on them.
The questions have ranged from “can they withhold my transcript” to “can they throw me in jail for not paying?” In the first of my two blog series, Defaulted Student Loan Consequences, we shall get to the heart of the matter.
Potential Defaulted Loan Consequences
| Your entire loan balance (principle and interest) may be due in full immediately |
| Your college records may be placed on hold |
| Your account may be turned over to a collection agency and you’ll have to pay additional charges, late fees and collection costs, all of which become part of your debt |
| Your federal and state income tax refunds can be withheld and applied to student loan debt. This is called a tax offset |
| You may not be able to obtain a professional license or get hired by an employer that performs credit checks |
For those students who’ve defaulted on their federal students loans the price can be steep. Below are some additional consequences which may arise if your loans fall into default.
Potential Defaulted Loan Consequences
| You’ll lose your student loan deferment options |
| You won’t be eligible for additional federal student aid |
| Your credit rating will be damaged for several years because defaulted loans are reported to national credit bureaus |
| You’ll have difficulty qualifying for credit cards, a car loan, a mortgage, or renting an apartment (credit checks are required to rent an apartment) |
| You may have a portion of your wages garnished (withheld) |
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