What is default?
Default means failing to make payments on a loan according to the terms of your master promissory note, the binding legal document you signed at the time you took out your loan. In other words, you failed to make your loan payments as scheduled.
What will happen if my federal student loans go into default?
If your loans go into default, the federal government will take action to recover the money you owe:
- National credit bureaus can be notified of your default, which will harm your credit rating, making it hard to buy a car or a house.
- You would be ineligible for additional federal student aid if you decided to return to school.
- Loan payments can be deducted from your paycheck.
- State and federal income tax refunds can be withheld and applied toward the amount you owe.
- You will have to pay late fees and collection costs on top of what you already owe.
- You can be sued.
How can I prevent my federal student loans from going into default?
If you think you might have a problem making the scheduled payments on your loans, contact your Direct Loan servicer immediately to discuss other repayment plan options, or deferment and forbearance which may have a slight negative affect your credit score.
A deferment is a temporary suspension of loan payments for specific reasons such as economic hardship or reenrollment in school.
- During deferment of subsidized loans, principal payments are postponed and interest is not accrued.
- During deferment of unsubsidized loans, principal payments are postponed but interest continues to accrue. Accrued unpaid interest will be added to the principal balance (capitalized) of the loan(s) at the end of the deferment period. This will increase the amount borrowers owe.
- During forbearance (below), principal payments are postponed but interest continues to accrue. Accrued, unpaid interest will be added to the principal balance.
- Contact your loan servicer for additional information.
In forbearance, your loan holder gives you permission to stop making payments for a set period of time. Interest continues to accrue. You may qualify for forbearance if you are unable to make loan payments due to certain types of financial hardships, poor health, unforeseen personal problems and other circumstances. Contact your loan servicer for additional information.
Already in default?
Find out your options online.
Getting the help you need
Student loan borrowers in default now have more options than ever before to resolve their student loans. The U.S. Department of Education's (Department) Default Resolution Group is committed to assisting individuals in default by making debt repayment a simple process, or contact your loan servicer.