If you default on your student loans, meaning that you are more than 270 days delinquent on your loan repayments, there can be serious consequences. Here are 10 things that could happen if you default on your student loans:
1. SMALLER PAYCHECK. Your paycheck may dwindle. The government can take a limited portion of your wages if you don’t pay your student loans back (up to 15% of your disposable income).
2. TAX REFUND OFFSETS. Until your student loans are paid in full, the IRS can intercept any income tax refund that you may be entitled to. This is one way the Department of Education annually collects hundreds of millions of dollars, and is a popular method to collect payment on defaulted loans.
3. HARASSED BY COLLECTION AGENCIES. Collection agencies will call your home, work, your family members, and anyone else they can track back to you. Until you start to pay, they will continue to harass and call.
4. GET SUED. Private lenders and the government could sue you to collect defaulted student loans. And unlike other debts, there is no time limit on suing to collect back student loans, so you could possibly be sued indefinitely.
5. NO FEDERAL BENEFITS. The government can take some of your federal benefit payments (like Social Security retirement benefits & Social Security disability benefits) to use as reimbursement for student loans.
6. RUNIED CREDIT RATING. Your credit rating will be wrecked for at least seven years, so trying to borrow money for a car, home, or other expensive items is out of the question.
7. NO FINANCIAL AID. It will be nearly impossible to receive more federal financial aid until you repay your student loan in full.
8. COLLECTION FEES. Loan agencies may charge you collection fees on your unpaid student loans. Also, collection agencies charge the Department of Education a commission, which you end up paying. So in the end you actually have to pay back 1) your student loan with interest, 2) the collection fees, and 3) the commission.
9. NO RENTING. When you submit an application to rent an apartment usually realtors, apartment owners, or rental agencies run a credit check on you to ensure you will make payments on time. You may run into trouble finding a place to live if you haven’t been paying your student loans.
10. DROPPING OUT OF SCHOOL WON’T HELP. Even if you drop out or switch schools, you will still need to repay the student loans you took out.
For more information on student loans, check out StudentAdvisor’s new Guide to Student Loans.
Do you have any advice for fellow students about paying off student loans? Comment and share below!