If you can’t make your student loan payment, the most important step for you to take is to ask for help – immediately – from one of the following organizations:
- Your lender or loan servicer.
- Your loan guarantor.
- Your school’s financial aid department.
You have several options for resolving your payment problems, including:
Take action today to address your payment issues, to avoid the following consequences:
Additional costs. Interest will continue to accumulate on your unpaid balance, and you may incur late charges. You'll also lose eligibility for interest-saving borrower benefits offered by some lenders.
Collection calls and letters. Your lender or servicer will send letters and attempt to call you to advise you that you've fallen behind in your payments and to counsel you about your options. After several weeks, your guarantor will join in the effort to contact you. The school you attended also may participate in this effort to help you resolve your payment problems.
Damage to your credit rating. If you've failed to make a payment for several weeks, your past-due account will be reported to national credit bureaus. This reporting will harm your credit rating.
Immediate payment in full. If you don't take action to resolve your past-due account for several months, you will receive a letter demanding immediate payment in full.
Severe consequences of default. If don't make your required payments for several months, or violate other terms of your loan's promissory note, you will end up in default. The consequences of default are very unpleasant.
Consequences of Loan Default
Your credit rating suffers. Your guarantor is required to notify national credit bureaus of your default. This notification will harm your credit rating and likely will make it difficult for you to obtain other types of consumer credit, such as a home mortgage or a car loan.
Your wages may be garnished. Your guarantor can notify your employer to withhold a portion of your pay, which will be applied to your unpaid balance.
You will incur additional costs. Collection costs of up to 24 percent of your outstanding balance may be added to your account when you default. In addition, interest continues to accrue. For example, if you default on $5,000 in student loans and fail to make a payment for two years, at the end of that period, the balance that you owe could grow to more than $7,000, including collection costs and additional interest.
Your income tax refunds may be seized. If you are due a federal income tax refund or other federal payment, that payment may be seized to satisfy the outstanding balance that you owe. In addition, some state governments also seize state tax refunds or benefit payments due defaulted borrowers.
You won't be able to receive additional federal student aid. If you wish to return to school, you will not be eligible for any additional federal student aid until you make arrangements to repay your loan.
You may be sued. Your guarantor or the federal government may file a lawsuit seeking a civil judgment against you for the amount you owe.
You lose deferment or forbearance options. Once you default on your education loan, you are ineligible for deferment or forbearance options under which borrowers in repayment may legitimately reduce or delay their loan payments for specified periods.
The debt doesn't go away. Your unpaid loan will stay with you until you pay it back. With rare exceptions, federal education loans aren't written off. Your guarantor, collection agencies or a unit of the federal government will continue to seek payment from you for years.
Getting Help with Past-Due Loans
Contact your lender or servicer, the organization to which you’re supposed to make your payments. If you don’t know who your servicer is, use the National Student Loan Data System website to get the information.
Student Assistance Corporation works on behalf of USA Funds to help keep borrowers who encounter loan payment problems out of default.
USA Funds Loan SolutionsSM is a website that allows you to view information about your USA Funds loans, including:
- The name and contact information for your lender or loan servicer.
- Your payment history.
- Resources to help you apply for loan payment relief.
If you have a dispute with schools, lenders or guarantors regarding a federal education loan, and have been unable to resolve the dispute, contact:
- U.S. Department of Education’s Federal Student Aid Ombudsman’s office: (877) 557-2575.