What Happens If You Don't Repay--Default

Defaulting on your loan has severe and long-lasting consequences. Avoid them by informing the Servicing Center if you think you'll have problems meeting your repayment terms. It's also very important to inform the Servicing Center if your address or telephone number changes so that your payment notices will continue to reach you, and the Center can contact you when necessary.

If you fail to make a payment on time, you're considered delinquent in repaying your loan. If you don't make payments for 180 days, your loan will go into default. If your loan defaults, you will have serious problems. For example

the Department will attempt to collect the debt and may charge you for collection costs.

Your default will be reported to national credit bureaus; negative reports will damage your credit rating and make it very difficult for you to borrow money or make purchases such as a car or house. The default notation will remain on your credit report for up to seven years, even if you arrange to repay the debt before then-unless you "rehabilitate" the loan .

you won't receive any additional federal student aid, and you may lose eligibility for other types of federal aid.

you can't receive a deferment for your defaulted loans unless you rehabilitate them.

the Internal Revenue Service can withhold your federal income tax refund(s).

your wages may be garnished. Obviously, you should avoid default if at all possible. However, if it happens, you can contact your Servicing Center to make satisfactory repayment arrangements that will reestablish your eligibility for federal student aid. Six consecutive, voluntary, on time, full monthly payments constitute satisfactory repayment arrangements. The payment amounts will be reasonable and affordable, based on your total financial circumstances.

To rehabilitate your loan-that is, to bring it out of default-you must make 12 consecutive, voluntary, reasonable, and affordable monthly payments under an agreement with the Servicing Center. Once you make these 12 payments, default information will be removed from your credit record.

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Postponing Repayment Loan Discharge