Consequences of Defaulting

Definition of Default

1) Failure to make a scheduled payment when due under the repayment schedule established by the institution or

2) Failure to submit to the institution, on or before the date on which the payment is due, documentation that qualifies the student loan for a deferment, forebearance or cancellation provision listed on the loan's promissory note.

The following actions may occur on a loan in default:

• Assessment of a $5.00 per month late charge
• Delinquency reported to a national credit bureau. A poor credit rating can hamper the possibilities of obtaining loans. If you are planning on financing a house or auto in the future, it is essential to remain up-to-date on your loans. Credit ratings usually remain on the Credit Bureau records for for approximately seven (7) years following the date of first delinquency.
• Ineligibility for future Title IV financial aid. Once a Federal Student Loan enters default status, it is extremely difficult to regain eligibility for additional financial aid.
• Placement of the loan with a licensed collection agency. Accounts placed with a collection agency are assessed fees that are charged by the agency. Collection fees can exceed 50% of the balance of your loan.
• Litigation and court costs. Costs of litigation can sometimes be quite high. Per Federal Regulations, these costs are charged to the student/borrower.
• Assignment to the Department of Education. Our office is not authorized to service any account assigned to the Department of Education. The deferment and cancellation provisions on the promissory note would no longer be valid. The Department of Education is also authorized to garnish income tax returns to recover the outstanding balance of assigned student loans.