What Can Happen With Unpaid Student Debt
Borrowers sometimes view student loan debt as a lower priority monthly expense, however, If you become 270-360 days late on a payment, you are considered in “default.” Defaulting on your student loan is avoidable. Defaulting on your federal student loans can have serious, long-lasting repercussions including:
- Being reported to credit bureaus which will affect your credit score for seven (7) years, impairing your ability to secure financing for a home or car, or obtain a credit card.
- Having your state and federal tax refunds garnished, or collected, until your loan is paid in full.
- Having your paycheck garnished for as much as 15% of your wages.
- Being held responsible for collections costs if sent to collections agency, which can increase your total loan amount by 25%.
- Having legal action taken against you by the Department of Education where you are responsible for court and attorney costs.
- Being ineligible for student loan deferment or forbearance options.
- Being ineligible for any Title IV financial aid until your default status has been resolved.
- Being unable to include federal student loan debt in bankruptcy declarations.
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