Student Loan Default
Getting behind on your student loan payments can have big consequences, so it’s important to know what “default” means and what to do if you’re struggling.
What Does It Mean to Default on a Student Loan?
"Default" generally occurs on a federal student loan when you don't make a payment for 270 days.
During the delinquency period, your loan servicer must make repeated efforts to locate and contact you about repayment. If the lender is unsuccessful, they'll take steps to place your loan in default.
You should avoid default at all costs! Unlike other consumer loans, student loans usually cannot be discharged through bankruptcy and will likely stay with you for the rest of your life.
If you don't make your federal student loan payments on time, you might face these consequences:
- Payment of entire loan balance (principal and interest) becomes due immediately
- Garnished wages and federal and/or state tax refunds
- Withheld Social Security retirement benefits and disability benefits
- Additional charges, late fees, and collection costs
- Lawsuits
- Ineligibility for additional student aid
- Damaged credit rating and lower credit score (which could prevent obtaining a mortgage, buying a car, or borrowing other consumer loans in the future)
- Loss of eligibility for loan deferments (such as for in-school, unemployment, etc.)
Even if you and DCC do everything right to prevent default, unforeseen circumstances can sometimes make it difficult for you to repay your federal loans.
If you’re having difficulties, be sure to contact your loan servicer right away! If you try to avoid them, you might lose out on some readily available repayment benefits and options:
- Alternative repayment plans to lower monthly payments (these can sometimes drive up the total cost of the loan).
- Loan forgiveness and discharge programs that can cancel loan obligations.
- Deferments and forbearance to temporarily suspend monthly loan payments.
If you default on your loan, you can regain eligibility for federal student aid:
- Contact your loan holder;
- Make satisfactory repayment arrangements; and
- Make at least six voluntary on-time payments for six consecutive months.
Repayment arrangements are a step in the right direction, but do not clear your loan's default status. Another option is to rehabilitate your loan – this will eliminate the default from your credit report and allow you to regain eligibility for more student aid.
- Contact your loan holder and begin making payments on your loan.
- Make 9 full voluntary payments within 20 days of the monthly due dates within 10 consecutive months.
You might also be able to negotiate a settlement with the collection agency. This could reduce what you owe, but it won't likely be a huge discount and it won't clear the default status. When settling, be sure to ask about having the collection charges waived and reducing on the total amount you owe.
Borrowers who have been in default for many years and don't have the resources to repay the loan are more likely to be able to negotiate a settlement.
If you have problems or disputes your federal student loan lenders or repayment services, these offices are available for assistance:
- U.S. Department of Education's Federal Student Aid Ombudsman
- Student Loan Borrower Assistance Project run by the National Consumer Law Center
- Consumer Financial Protection Bureau Ombudsman (for private loans)
Contact Us
Student Financial Services
Mon. - Fri. 8 a.m.-5 p.m.
Phone: (845) 431-8060
Email: financialservices@sunydutchess.edu
53 Pendell Road
Poughkeepsie, NY 12601