Understanding Default

If you don’t make your loan payments, you risk going into default. Defaulting on your loan has serious consequences. Your school, the financial institution that made or owns your loan, your loan guarantor, and the federal government all can take action to recover the money you owe. Understand how missing a loan payment can be a problem, what default means and the consequences of default, and what you need to do if your loan is in default or if you think the default on your loan is an error.  After reading this information, you may want to review Avoiding Default or Getting Out of Default.

What is default?

To default means you failed to make your payments on your student loan as scheduled according to the terms of your promissory note, the binding legal document you signed at the time you took out your loan.

How is missing a payment a problem?

Your loan becomes delinquent the first day after you miss a payment. The delinquency will continue until all payments are made to bring your loan current. Loan servicers report all delinquencies of at least 90 days to the three major credit bureaus. A negative credit rating may make it difficult for you to borrow money to buy a car or a house (you will be charged much higher interest rates). You also may have trouble

  • signing up for utilities,
  • getting home owner’s insurance,
  • getting a cellphone plan, or
  • getting approval to rent an apartment (credit checks usually are required for renters).

It is important to begin repaying as soon as you receive a bill. Keep track of your student loan and learn how to manage your loan repayments.

How do I avoid default?

If you are having trouble making payments on a loan from the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan (FFEL) Program, immediately contact your loan servicer, the agency that handles the billing and other services for your loan.

If you are having trouble making payments on your Federal Perkins Loan, immediately contact the school where you received your loan.

Whether your loans are delinquent now or not, you should read our tips to help you avoid default.

If I don’t make my loan payments, when is my loan considered to be in default?

If you repay your loan

  • monthly, default occurs when you fail to make a payment for 270 days.
  • less than once a month, default occurs when you fail to make a payment for 330 days (this applies only to FFEL Program loans).


What should I do if my loan is in default?

If you have defaulted on any of your federal student loans, take the following steps:

  • Always stay in touch with your lender, loan servicer, or collection agency.



What are the consequences of default?

The consequences of default can be severe:

  • 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 to collect any of your defaulted student loan debt.
  • 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.
  • It will take years to reestablish your credit and recover from default.

What if my loans are in default, but I think it’s an error?

If you believe your loan has been placed in default by mistake, you may be able to correct the error. Here’s what you should do if one of the following is true.

IF: You’ve been attending school on at least a half-time basis.

THEN: Contact your school’s registrar to get a record of all your dates of at least half-time attendance. Contact each school you have attended since you received your loan so your documentation is complete. Ask your loan servicer for the last date of attendance they have on file for you. If they have the incorrect date for your last date of attendance, provide your loan servicer with a copy of your documentation showing the correct date.

IF: You have a deferment or forbearance.

THEN: Ask your loan servicer to confirm the start and end dates of any deferments and forbearances that have been applied to your loan account. If the loan servicer has incorrect information, provide documentation with correct information.

IF: You believe you’ve made payments that weren’t credited to your account.

THEN: Ask your loan servicer for a statement that shows all payments made on your student loan account. If payments you made are not listed, provide proof of payment to your loan servicer and request that the information in your account be corrected.

Whom do I contact for information about my defaulted Health Education Assistance Loan (HEAL) Program loan?

If you’re in default on your HEAL Program loan, contact the Debt Collection Center for help with account-related questions:

Mailing Address:
Debt Collection Center
Accounting Services
Program Support Center
12501 Ardennes Ave
Suite 200
Rockville, MD 20857

Note: It is no longer possible to obtain a new HEAL Program loan. The making of new HEAL Program loans was discontinued on September 30, 1998.