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What happens when your student loans go into default?


“The weather is just like student loans” and kind of tweets which define “bad” in different words are now popular among the new generation. The reason is simple: the student loan debt is the second highest in the debt category list after the home mortgage debts. Statistics for 2018 reveal that there are approximately 44 million students and grads who are struggling to repay their financial obligations in time. The total student loan debt for 2018 was calculated as a $1.52 trillion which can be perceived as a real crisis. While an average 20-year-old’s loan payment is $22,135, the respective number for 30-year-olds is $34,033. However what if a borrower cannot pay his debts totally? What if his job doesn’t cover his taxes? The answer is predictable: he faces a student loan default. In this article, we will explain what happens when your student loans go into default and offer the solution for fixing student loan default.


Federal Student Loans: Deferment or forbearance


federal student loan forgivenessYou can use a student loan deferment or loan forbearance when you want to give a pause on paying your federal student loan or when you want the reduction in your payment. It will help you avoid the possibility to go into student loan default. The difference between the deferment and the forbearance is that you are obliged to pay the interest rates during the deferment period.

Furthermore, while the suspense for the former is 36 months, the limit for the latter is 12 months. If your approved program is full-time, it also the case that you can apply for the deferment.

The circumstances that your lender waits for you temporarily is when you are unemployed, in military service or Peace Corps, in some economic hurdles. You shouldn’t stop paying your debts until the approval came. If you don’t do so, your loan becomes delinquent and you are the new candidate whose loans go into default and who should seek ways for fixing student loan default.

Delinquency and default


The U.S. Department of Education states that if the student misses the payment date, the federal loan becomes delinquent. If the delinquency continues 90 days longer, the case is reported to the 3 major credit bureaus resulting in not being able to purchase an apartment, a cell-phone, home insurance, a car or even a credit card. After 270 days are completed, the loan goes into default status. In this case, the federal lenders gain the power to require all the remained balance at once. This overwhelming process is called “acceleration”. When the loans go into default, the borrowers cannot pursue any loan forgiveness, deferment or forbearance and lose their chances to plan the payment as well. Additionally, if your loans went default, you cannot require any other type of student aid from the federal government.


Don’t get surprised if you can’t see your income as much as it was supposed to be. Seizing the wages to pay the defaulted debts is another “gaining the money back” method of the federal lenders. We should mention that this operation is held without filing a lawsuit against a borrower which differs the federal loans from the private ones. The latter should go to court.
Did you win the lottery? What good news! But not for you. State lottery winners are under fear of the lottery cut off by the U.S. Treasury.


Private student loans


Navient Student Loans

It is a more difficult situation to handle private student loan defaults. The private lenders or banks will order the full payment of the loan forthwith. As the cosigners are also thought as borrowers, they are required to make the full-payment as well. Your cosigner was generous and paid your debts? Sorry for you, but you still stay responsible for your student loan. Education is pretty costly, huh?


The stress and its severe consequences

The psychological pressure is also applied by private lenders. The continuing phone calls and emails put pressure on the borrower, cosigner and their families. Although being stoppable, these collection calls are still enough to make the people get depressed. Some people’s personal relationships get ruined which can even lead to a divorce. And the saddest scene seen is suicide. After losing their desperation after long years of paying non-stop debts, some people see death as their only choice.

Interest rates

There are 2 types of interest rates in student loans: fixed and variable. While the rates for federal loans are always fixed, as a rule, the private lenders give the borrowers a choice to pick up the type of rate suitable for them. It should be kept in mind that although the variable interest rate is less than the fixed one at the initiation of the process, it has the potential to skyrocket during the payment years. Because of the lack of financial literacy, the young borrowers usually opt for the wrong interest rates which they cannot pay event after more than 10 years. You can use the average interest rate calculators for that.

Action on the court

What happens on the court? In contrast with the federal lenders, private lenders get more disposable pay. While the court can decide a wage garnishment for the federal loans up to 15%, the respective case for the private loans is up to 25%. The difference is easily noticeable.


The approximate debt for an average student in the Class of 2017 is calculated to be $37,172. The students need to get informed about the student loans debts statistics before making a crucial decision.
The latest update from the U.S. Department of Education shows how critical the situation is:
– 10.8% of the recent graduates and the students who left the college has gone into student loan default.
– Although the conditions are very severe, the lowest short-term default rate is seen in the private non-profit agencies with a minimal amount of 7.1%. The respective case for public organizations is 10.3.
– Private, for-profit schools have the highest student default rate with 15.6%.




federal student loan forgiveness

There are a lot of student loan debt stories on the Internet shared by people with different age groups. Although somehow unbelievable, some of them are not young at all. It is really a bitter situation when you are at your retirement age but you still pay your loans. What did you get from the education that cost you a stressful life? Is education meant to be this luxury? Think twice before making a choice.

What can you do if your student loans go into default?

If your income cannot pay your loans or you are unemployed, you are likely to feel nervous about your accelerating unpaid debts. The first thing you should consider is to talk to your lender. Remember that the lenders want you to pay their money back in time, so don’t hesitate to communicate. Choose your options correctly.
Federal student loans give more opportunities rather than private ones. These include lower monthly repayment and income-based payment options. Although it is not predicted the private lenders to offer these choices, it is always worthy to ask. Ask your lender’s requirements directly.


It cannot be denied that education is important for earning a living in the 21st century. But what happens when you cannot pay for this “happiness”? Search about all the pros and cons of student loan default before signing the agreement.