Default & Delinquency

When you monthly payment is 30 days or more overdue, you are considered as a delinquent borrower and it may result in your delinquency being reported to a credit bureau. This could damage your credit rating. It is essential that you contact your Servicer immediately if you are unable to make a monthly payment to avoid default. It is always easier to discuss alternatives before the due date rather than after a payment is late.

If you fall 270 days behind on a scheduled payment, you are legally in default on your loan agreement. The Servicer can assume that you are not going to repay; and the Servicer may declare the entire amount you owe, including interest, as immediately due and payable.

Defaults are reported to credit bureaus and stay on your credit record, whether or not you eventually pay off the loan. The consequences of default are severe:
  • You are liable for late charges which can be added to the principal of your loan, and on which you will then pay interest.
  • When your loan is in default, your US Income Tax refunds may be withheld to repay the loan.
  • Your wages may be garnisheed (a portion withheld for repayment).
  • You may have to pay attorney fees and/or court costs
  • You lose eligibility for Federal and State financial aid until you have made satisfactory repayment arrangements on the defaulted loan.
  • In a profession that requires a license to practice, that license can be denied renewal until you make satisfactory payment arrangements.