Please inform your students that to default on a Federal Student Loan means the failure to repay a loan according to the terms agreed to when he or she signed a promissory note. For loans received through the Federal Direct Loan Programs, a student is considered to be in default when they fail to make a payment for 270 days.
The consequences of default are severe:
1. The college, the lender or agency that holds your loan, the state, and the federal government may all take action to recover the money, including notifying national credit bureaus of your default. This affects the student's credit rating for a long time. For example, a student might find it very difficult to borrow money from a bank to buy a car or a house.
2. In addition, the Internal Revenue Service can withhold a student's U.S. individual income tax refund and apply it to the amount the student owes, or the agency holding the loan might ask an employer to deduct payments from the student's paycheck.
3. Also, the student will be liable for loan collection expenses.
4. Students who are in default on their federal student loans are ineligible to receive federal student aid (Pell Grant, SEOG, FWS, ACG, & Student Loans) until the default status is cleared.
In many cases, default can be avoided by submitting a request for a deferment or forbearance. To clear a defaulted status, the student should contact their loan servicer to determine what steps can be taken.
Ramon L. Rodriguez
Financial Aid
02/05/2010 |