Notice: Undefined index: articledetail in /home/utils/securefiles/securecode/utl_article.cls.php on line 643
Defaulting on Education Loans |
College Loan Consolidation, Federal Loan Consolidation, Private Loan Consolidation, Student Loan Consolidation

America's Top Student Loan Provider

Defaulting on Education Loans
By Amit Agarwal
When taking out a student loan you should know that you are undertaking a promise to repay, irrespective of whether you graduate successfully, have difficulty finding a job, or choose to withdraw from college. Defaulting on federal student loans can cost you much more than the amount you originally borrowed. However, there are ways to avoid default and steps you can take to get out if you are already in default.

You are in default if you miss your monthly payments for 270 days and have no arrangements to get a deferment or forbearance from your lender. There are serious consequences on a student loan default.

The price you pay on a student loan default

Defaulting adds other costs apart from the outstanding amount on your loan. You may end up paying 25% to 50% more than the principal loan along with interest. When you default, your loans may be handed over to a collection agency. The price you pay for default include:
  • Collection agency's collection costs, including court costs and attorney fees
  • Late payment charges and interest accrued
  • Sued for the entire loan amount
  • Garnishment of wages up to 15% of your take-home pay
  • Ineligibility for deferments
  • Interception of your federal and state income tax refunds
  • Denial for further federal aid
  • Withholding of part of Social Security benefit payments
  • Damaging your credit score
  • Refusal for federal interest benefits
  • Refusal for renewing a professional license, if you hold one
Avoiding a student loan default

An understanding of the terms and conditions of your loan along with keeping your payments on track will avoid any possible default. There are a number of ways in which you can prevent a loan from defaulting:
  • Do not borrow more than you need
  • Understand your re-payment options and responsibilities before taking out a loan
  • Keep your student loan documents including letters, promissory notes, and cancelled checks in a file folder
  • Set up an automatic electronic payment system or reminders for your payment dates
  • Let you lender know of any change in your personal details effecting your loan payments, such as name, address, transfers to another school, and graduation or termination
  • In case of financial difficulties in repaying your loans, consider applying for a deferment or forbearance
  • Ask your lender for alternate repayment options. Most lenders provide graduated repayment, income sensitive repayment, income contingent repayment, and income-based repayment options
  • Consolidate all your different education loans into a single loan with a single payment
What to do if you default

If you default on a student loan, try to work a repayment plan within 60 days of default, in which case some collection agencies will waive or reduce their collection fees. If you make six consecutive full voluntary on-time payments, you are entitled to an additional Title IV aid. After paying 9 of 10 consecutive payments within 20 days of the due date you can receive "rehabilitation", which means you are no longer considered in default.

Until 90 days after the default, the lenders do not need to file a default claim. Therefore, if a borrower brings the delinquency within the 90-day period, the lenders can cure the default. As a result, you have a chance for a cure until about three months after your default occurs.

Consolidation of your delinquent loan before the lender files for a default claim is an effective technique. Consolidation is a new loan that pays off the delinquent loan and frees you from default status.

A student loan is a facility that helps you pursue your dreams, but at the same can give you nightmares if you default. It is always advisable to take prompt action and minimize the risk of default.

On the Net

What Happens If You Default on Your Student Loans

Defaulting on Student Loans


Article Title : Defaulting on Education Loans
Comment not found for this article.

Related articles
• Consolidate Student Loans, The Advantages
• Deferment And Forbearance - When You're Having Trouble Making Your Student Loan Payments
• Opt For Student Loan Consolidation and Solve Your Student Loan Problems
• Student Loan Consolidation Guide
• Finding The Right College Student Loan

Share this story:
  • BlinkList
  • blogmarks
  • Digg
  • Facebook
  • Google
  • Sphinn
  • MySpace
  • NewsVine
  • Simpy
  • StumbleUpon
  • Technorati
  • E-mail this story to a friend!
  • Print this article!
  • Faves
  • Furl
  • Netvouz
  • Slashdot
  • Spurl
  • Yahoo! Buzz

EdFed introduces… Awareness… Learnal
At, EdFed, we proudly introduce 'articles on student loans' and 'Learnal - the journal to learn from', our free newsletter on student loan management, which is sure to keep you informed of the latest events and happenings in the student loan market. To receive your copy of the above just use the RSS feed below and add this to your "My Yahoo", blogs, newstickers, and other similar channels accepting distributable content.
Click here to sign up for our Weekly Newswire now!

How EdFed Helped others!
I really admire the entire EdFed organization along with their loan counselors and customer service representatives. Very professional and a tremendous help.
- Don W.  Las Vegas, NV
* Your Name: * Your E-mail Address:

We respect your privacy.
* Your Friend's name: * Your Friend's E-mail address:
Include a Message:
+ Privacy Policy

Student Loan Consolidation Info - How to Choose the Right Loan Company

This column is sponsored by Granted, America's top job search engine. The Career Resources column is presented by Granted, America's leading job search engine dedicated to getting people jobs.

Education is one of the most basic right of any human, but with the increase in prices and the costs involved in education this has made these rights turn into a privilege which very few can enjoy. Any normal person today in the whole of United States has to take an education loan at one point of time to pay for their education fees.

read more
Schools Will No Longer Receive Paper FAFSA Forms
(September 20, 2007)

news desk
Stafford Loan Payment Calculator
PLUS Loan Payment Calculator
Loan Consolidation Payment Calculator
Glossary of Terms
Loan Comparison Chart
Scholarship Search
If all of your federal loans are with one student-loan company, EdFed can still help you consolidate your loans to get a better interest rate and better customer service.
US School Directory
Comprehensive List of Schools at which EdFed Assists Students.
EdFed is a FFELP lender with lender identification number 834241.
© Copyright 2020 EdFed. All Rights Reserved.

Home · About Us · Contact Us · News · Sitemap
Career Advice · Tell a Friend · Privacy Policy · Resume Service
Resume Distribution Service · Post Resume · Job Search Course
Sign up for the latest news on student loans.
Email Address:
+ Most Recent Newsletter
+ Newsletter Archives