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What Happens If I Don't Pay Back My Loan?

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Functional GroupFinancial Aid
If you do not pay back your loans, they will become delinquent and will eventually go into default. Default occurs when you fail to make a loan payment for 270 days. The consequences of default are serious and long-term. They include:
  • The entire unpaid balance of your loan and any interest is immediately due and payable.
  • You lose eligibility for deferment, forbearance and repayment plans.
  • You lose eligibility for additional federal student aid.
  • Your loan account is assigned to a collection agency.
  • The loan will be reported as delinquent to credit bureaus, damaging your credit rating (this will affect your ability to buy a car or house, or to get a credit card).
  • Your federal and state taxes may be withheld through a tax offset (this means that the Internal Revenue Service can take your federal and state tax refund).
  • Your student loan debt will increase because of the late fees, additional interest, court costs, collection fees, attorney’s fees and any other costs associated with the collection process.
  • Your employer (at the request of the federal government) can withhold money from your pay and send the money to the government (this process is called wage garnishment).
  • The loan holder can take legal action against you, and you may not be able to purchase or sell assets such as real estate.
  • Federal employees face the possibility of having 15% of their disposable pay offset by their employer toward repayment of their loan through Federal Salary Offset.
If you are having trouble making your monthly payments, contact your loan servicer immediately. Your loan servicer can help you understand your options. If you are unsure which type(s) of loan(s) you have, check your original loan documents or log in to the National Student Loan Data System

Please note: Information about any private student loan you may have received will not be included in the NSLDS.

Related Article: What is a Defaulted Loan?


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