Defaulting on a federal student loan can have serious consequences, both financially and personally. It is important to understand the potential implications of defaulting before making the decision to do so.
When a borrower defaults on their federal student loan, it means that they have failed to make their payments for a period of nine months or more. At this point, the borrower is no longer eligible for federal student aid because the loan is in default.
The immediate consequence of defaulting on a federal student loan is that the loan is sent to a collection agency. This means that the borrower will have to deal with aggressive ways of getting the money back, such as having their wages taken, having their tax refunds taken, or even being taken to court.
Defaulting on a federal student loan also has long-term consequences. The loan will remain on the borrower’s credit report for seven years, making it difficult to obtain credit or qualify for a loan in the future. Additionally, the defaulted loan may be reported to credit bureaus, making it difficult to find employment or rent an apartment.
Defaulting on a federal student loan can also have an emotional impact. Many borrowers feel guilt and shame for not being able to repay their loans, and this can lead to feelings of depression and anxiety.
If you are struggling to make your student loan payments, it is important to seek help before it is too late. There are several options available, such as income-driven repayment plans, loan deferments, and loan forbearances, that may help you avoid defaulting on your loan. It is also important to contact your loan servicer to discuss your options and find a solution that works for you.
Defaulting on a federal student loan should always be a last resort. It is important to understand the potential consequences before making the decision to default, as the consequences can be serious and long-lasting.