What you can do now

If your student loans are delinquent but you haven’t yet defaulted, contact your lender immediately. Take action now while you still have options.

If you’re in default, contact your loan holder. They can help you find a solution and avoid some of the consequences.

If you don’t know who your loan holder is, go to the National Student Loan Data System (NSLDS), which is the central database for all federal student loan information. If ECMC holds your loans, contact us.

What happens when you default?

When you default, your loans fundamentally change. You can't apply for a forbearance or deferment. Standard benefits like extended payment options and interest subsidies go away.

And that’s not all you can lose. You can lose a portion of your wages and your tax refund—sometimes even other government payments can be used to pay back your student loan balance.

Here are some of the consequences of defaulting on a federal student loan:

• Defaulted student loans do not go away
• You lose benefits like deferment, forbearance and flexible payment options
• You can lose 15% of every paycheck
• You can lose your tax refunds or other government payments
• Your loan balance can increase by up to 25% due to collection costs
• You can damage your credit score
• Your loan can be placed with a collection agency
• You can be sued for the entire loan amount
• You can hurt your career

Defaulted student loans do not go away

Unlike other forms of debt that may be written off after a borrower defaults, student loans must be paid back in full. Not even—except in rare cases—can bankruptcy discharge a defaulted student loan.

You lose benefits like deferment, forbearance and flexible payment options

When you default, all the basic terms of your student loans change.

• Deferment and forbearance are no longer available
• Options for flexible repayment plans go away
• Subsidized interest benefits stop
• You cannot receive additional Title IV financial aid

You can lose 15% of every paycheck

If you default, federal law allows loan holders to take up to 15% of your disposable income every month until your defaulted loans are paid in full (this is known as administrative wage garnishment).

You can lose your tax refunds or other government payments

Federal student loan funds are all ultimately taxpayer dollars, and the government protects its investment. If you don’t pay your defaulted loans, the government can “offset” money it owes you and apply that money to your outstanding balance by:

• Keeping your federal and state income tax refunds
• Taking part of your Social Security (SSA) payments
• Withholding stimulus payments from you

Your loan balance can increase by up to 25% in collection costs

While you were delinquent, your loan servicer added the accruing interest to your principal loan balance. That is, they capitalized the interest. Your loan balance in default is therefore higher and can continue to grow:

• Interest continues to accrue
• Collection costs up to nearly 25% of your loan amount will be added to your balance

You can damage your credit score

Your loan holder reports defaulted student loans to the national credit bureaus. Reported defaults stay on your credit report for seven years, and your loan holder will continue to report your loans as active defaults until you resolve the default or pay the loans in full.

An ongoing default will lower your credit score. A low credit score can make it difficult and expensive to do many things like:

• Get a credit card
• Finance a car
• Purchase a home
• Get insurance

Poor credit can even make it difficult to get a job because many employers now use credit scores to select an applicant.

You are subject to collections

Once you default, your loan holder can place your loans with a collection agency. Collection agencies can be aggressive in their pursuit of outstanding loans.

You can be sued for the entire loan amount

Your loan holder isn’t limited to garnishing your wages and pursuing collections. They can also sue you in civil court for any outstanding balance. Plus, they can add all court costs and legal fees to the amount you owe.

You can hurt your career

Federal law prohibits defaulted student loan borrowers from renewing professional licenses in medicine, dentistry, law and several other disciplines.