Borrowers often view student loan debt as a lower priority monthly expense as compared to more immediate concerns. If you become 270-360 days late on a payment, you are considered in “default”. This is what we need to avoid. Defaulting on your federal student loans has serious, long-lasting repercussions:

  1. Reported to credit bureaus which will affect your credit score for 7 yrs. (impairing your ability to secure financing for a home or car, or get a credit card)
  2. Garnishment of State and Federal tax refunds until loan is paid in full.
  3. Garnishment of up to 15% of your wages.
  4. Responsible for collection costs if sent to collection agency (can increase loan by 25%)
  5. Dept of Ed can take legal action with borrower responsible for court and attorney costs.
  6. Not entitled to deferment or forbearance options.
  7. Will not be eligible for any Title IV financial aid until out of default.
  8. Federal student loan debt cannot be forgiven by declaring bankruptcy.

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