What Are Your Options After You Default on Student Loans?

If you've defaulted on your student loans, you're not alone in your feelings of financial defeat. The U.S. Department of Education estimates that 8.2 million students have defaulted on their federal student loans; this number does not include those who have defaulted on their private student loans.

Thankfully, it is possible to get out of student loan default. Learn the consequences of not paying back your student loans, the steps you can take to get out of default, and what you can do to avoid falling into default again.

The Consequences of Not Paying Back Your Student Loans. The ramifications of not paying back a student loan can be disastrous. When a loan goes into default, the entire balance is due all at once; this is called acceleration. Debts that go to collections can remain on a credit report for as long as seven years if they go unpaid. The lender may even file suit to collect, with the potential for you to lose your job and property if you do.

Both the type of student loan (federal vs. private) and the location you currently call home will affect the timeline and ultimate result.

Loans for higher education provided by the federal government. Delinquency in student loan repayment occurs when a payment is missed. There may be negative effects on your credit score after being 90 days past due.

Most federal student loans go into default after nine months of nonpayment; however, Federal Perkins loans can go into default as soon as a payment is missed. Forbearance, deferment, and certain types of repayment plans are not available to borrowers who enter default.

Loans for private schooling. You should consult your loan agreement for information about delinquency and default that is applicable to your lender. According to the Consumer Financial Protection Bureau, private student loan debt enters default after 90 days or three missed payments.
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