How do you know you’re in federal student loan default?   It’s been 270 days since you last made a payment.  You can determine your status and see if you’re in default by going to the National Student Loan Database.

So what’s the big deal about being in default?

Automatic Wage Garnishment (AWG)

First, federal student loan lenders can always garnish your wages if you’re in default.  There is no statute of limitations on federal student loans and they don’t need to sue you first.  Moreover, It’s hard to delay a garnishment if you’ve received notice of their intent to garnish. The garnishments can be up to 15% of your disposable income.

Income Tax Refund Interceptions

Second, your income tax refunds may be seized.  Again, federal lenders don’t need special permission to do student loan refund seizures.

Educational Plans on Hold

Third, if you’re in student loan default, you might be blocked from returning to school, because you’ll be barred from receiving any further federal student loans while you’re in default.

There are additional problems with default, namely that your loan will be transferred to a third party debt collection agency, which will add automatic collections fees and costs to your loan balance. Please note that these fees and costs are quite hefty, and they are difficult, if not impossible, to remove.

Finally, once in default, you become ineligible for options such as deferment or forbearance or for other more attractive repayment programs, such as the Income-Based Repayment program. You cannot be in default if you want to pursue any such program.

If you’re in federal student loan default, you should immediately begin to explore your options on getting out of default.

If you have any questions on student loan default, please let me know below!