If you default, it means you failed to make payments on your student loan according to the terms of your 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. Your school, the financial institution that made or owns your loan, your loan guarantor, and the federal government all can take action to recover the money you owe. Here are some consequences of default:
- Your entire loan balance (principal and interest) will be due in full immediately.
- A collection agency will take over your loans and you will incur additional fees.
- Your credit history will be severely damaged and you will be unable to obtain a home mortgage.
- You will be required to pay much higher interest rates on vehicle purchases and credit card balances.
- You will be required to pay higher insurance premiums.
- Your wages may be garnished.
- Your tax refund and Social Security benefits may be withheld.
- You will no longer be eligible for future federal loans.
- Deferment will no longer be an option for you.
- You may have difficulty getting a job (employers check your credit history as part of the highering process).