A student loan default can lead to damaged credit, collection fees and, for federal loans, extra collection powers. There are usually ways to recover, and the rules change often, so use official sources.
When a loan defaults
Federal student loans generally go into default after about 270 days of missed payments, though the exact timing depends on the loan type. Private loans follow the contract and may default much sooner.
Consequences for federal loans
- The full balance can become due.
- Collection costs may be added.
- The government can withhold tax refunds and some benefits.
- Wages can be garnished without a lawsuit.
- You can lose eligibility for more aid, and credit takes a hit.
Ways to resolve a default
- Loan rehabilitation by making a series of agreed payments.
- Consolidation into a new federal loan.
- Paying in full or settling in some cases.
- Checking whether you qualify for discharge, such as for total and permanent disability or school closure.
Private loans
Private lenders must usually sue to collect and win a judgment before garnishing wages. Time limits for suing vary by state. Ask the lender about hardship or modification options, and do not ignore court papers.
Where to get help
Use the U.S. Department of Education's student aid website for current options, and be wary of companies that charge fees for services you can do free. Legal aid and nonprofit credit counselors can also help.
Frequently asked questions
Can student loans be discharged in bankruptcy?
It is difficult, usually requiring a separate proceeding to show undue hardship, though standards have been loosening in some courts.
Does default stay on my credit report?
Negative marks generally remain for several years, and rehabilitation can help remove the default notation.