Delinquency and Default

What if I Don’t Pay?

You don’t have a choice. Your lender is the federal government of the United States. If you don’t pay, they’ll just take your money.

Once you default, they can:

Seize up to 15% of your paycheck

Keep your tax refunds and federal benefit payments

Take you to court

The details are below. TLDR – Fix your loans now, or your current problems will be much worse.

Don’t Wait

Once you miss a payment, you have a limited time to fix you your loans. Hiding, claiming ignorance or complaining won’t save you. Solve the problem NOW.

  1. Research your options – You may be able to temporarily pause your monthly payments or switch repayment plans.
  2. Call your loan servicer – They can advise you on your options and make changes to your account.

If you want help with this process, call Student Connections at (866) 311-9450. Our Borrower Advocates are friendly and know the system. It’s also free to you.

A Common Mistake

Simply restarting payments WILL NOT fix your loans. You MUST contact your loan servicer and follow their instructions to fully repair your account.

The Details

There are two stages of non-payment:

Delinquency – A long, slow slide. This stage is warning period. You’ll incur penalties along the way, but you’ll also have time to fix your repayment issues.

Default – A sudden drop into a deep pit. You lose most of your negotiating power, and the government can seize what you owe.

Here’s a delinquency and default timeline starting on your first day of non-payment:

  • Day 1 – Your loans are officially delinquent. The interest on your loans continues to accrue, which increases your total debt.
  • Day 90 – Your loan servicer reports you to the credit bureaus. As a result:
    • Missed payments will show up on your credit report
    • Your credit score may drop
    • Securing an apartment lease, car loan or other forms of credit may get harder.
  • Day 91 to 270 – Your servicer will update the credit bureaus on additional missed payments. This will hurt your credit report even more.
  • Day 271 – Your loans enter technical default where you lose eligibility for additional financial aid and Public Service Loan Forgiveness (PSLF). At this point, you have 90 days to resolve your delinquency or face being sent to collections.
  • Day 360 – Your loans are now in legal default and you lose many of the protections granted to student loan borrowers.
    • Your total debt is due immediately
    • You cannot switch repayment plans
    • You are no longer eligible for forbearance or deferment
    • You incur additional collections fees

Once your loan enters collections, the government will take what you owe them. They can:

  • Seize up to 15% of your paycheck
  • Keep your tax refunds
  • Take you to court
  • Withhold federal payments like Social Security

In addition, the government will charge the cost of debt collection to you. You’ll literally pay them to find you. Visit StudentAid.gov for even more information on delinquency and default.