Defaulting on a student loan can have serious consequences, including:
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Acceleration: The entire unpaid balance of your loan and any interest you owe becomes immediately due.
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Credit Damage: Late payments and default can be reported to credit bureaus, which can damage your credit score and make it harder to obtain credit in the future.
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Collections Practices: The government can use a variety of methods to collect on defaulted loans, including tax refund and Social Security benefit confiscation, paycheck garnishment, and associated fees.
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Ineligibility for More Federal Financial Aid: If you default on a federal student loan, you may become ineligible for additional federal financial aid.
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Transfer to a Private Collection Agency: Before the current payment pause on federal student loans, defaulted loans were transferred from their assigned servicer to a private collection agency (PCA) through the Department of Education’s Default Resolution Group.
Its important to note that the consequences of defaulting on private student loans may vary from lender to lender. If you are struggling to make payments on your student loans, it's important to contact your loan servicer as soon as possible to discuss your options.
