Default is the failure to repay a loan according to the terms you agreed to in your promissory note. For more federal student loans, you will default if you have not made a payment in more than 270 days. If you default on a federal student loan, you lose eligibility to receive federal student aid and you may experience legal consequences. 

Ways to avoid defaulting on your student loan 

• Create and maintain a budget that will keep you within your monthly budget.
• Avoid credit card debt or keep your existing credit card debt to a minimum. 
• If you choose to borrow for your college expenses, borrow only the amount that you need and what you can reasonably expect to repay. 
• Know the type of loan you are receiving and understand your rights and responsibilities as a borrower. Know your repayment obligation and learn about your repayment options. 
• Keep all records regarding your loan. Make copies of all letters, canceled checks and any documents you sign. 
• Notify your lender or servicer when you have a change of address, phone number, or name. Also notify your lender or servicer if you change schools or your enrollment status changes. 
• Talk to your lender or student loan guarantor if you have any questions about the terms of your loan. 
• Consider making interest payments while you are in school. This will reduce the amount you owe after your graduation. 
• Seek help as early as possible if you have any difficulty maintaining your student loan repayment arrangement. 

What are the Consequences of Loan Default?

The consequences of defaulting on your student loan can be severe. If you default: 

• The entire unpaid balance of your loan and any interest you owe becomes immediately due (this is called "acceleration"). 
• You can no longer receive deferment or forbearance, and you lose eligibility for other benefits, such as the ability to choose a repayment plan. 
• You lose eligibility for additional federal student aid (such as grants or Federal Work-Study). 
• The default is reported to credit bureaus, damaging your credit rating, and affecting your ability to buy a car or house or to get a credit card. 
• It may take years to reestablish a good credit record. 
• You may not be able to purchase or sell assets such as real estate. 
• Your tax refunds and federal benefit payments may be withheld and applied toward repayment of your defaulted loan (this is called “Treasury offset”). 
• Your wages may be garnished. This means your employer may be required to withhold a portion of your pay and send it to your loan holder to repay your defaulted loan. 
• Your loan holder can take you to court. 
• You may be charged court costs, collection fees, attorney’s fees, and other costs associated with the collection process. 

If you have defaulted on your student loan, click here to find out how to get out of default.