No one ever wants to think about defaulting on their student loans, but it’s important to be prepared if the situation should arise. If you’re considering taking out student loans or you already have, keep reading.

Federal student loan delinquency and default refer to situations where borrowers have not made their required loan payments on time.

Delinquency occurs as soon as you miss a payment deadline, whereas a loan doesn’t go into default until you are delinquent for many months.

In both situations, a borrower may face the consequences, such as wage garnishment, seizure of tax refunds, and legal actions.

It’s essential for borrowers to stay up-to-date on their loan payments and to contact their loan servicer if they’re experiencing financial difficulties.

Learn more about student loan delinquency, student loan default, what can happen, how to recover from delinquency or default, and where to find college planning specialists for advice.

What is federal student loan delinquency?

Federal student loan delinquency occurs when a borrower has missed one or more payments on their federal student loan and is late making their payments.

Generally, a federal student loan is considered delinquent when a payment is not received by the due date, which is usually the same day each month.

The loan servicer may charge a late fee, and the delinquency will be reported to the credit bureaus, which can negatively impact the borrower’s credit score.

The federal government allows for a grace period of nine months before a loan is considered in default. During this time, the borrower can make up any missed payments and bring their loan current.

Communicating with loan servicers is important if you are having financial difficulties. There may be options to help you avoid delinquency or default, such as enrolling in an income-driven repayment plan or requesting a deferment or forbearance.

When is a federal student loan in default?

Your federal student loan can default if you fail to make payments on your federal student loan for an extended period, usually 270 days or more.

At this point, the loan defaults, and a borrower may face serious consequences.

Some of these consequences may include the following.

Acceleration of the loan

The entire loan balance may become due immediately, and the borrower may be required to repay the whole balance, including accrued interest and fees.

Wage garnishment

The government may garnish the borrower’s wages to collect on the loan.

Seizure of tax refunds

The government may seize the borrower’s federal and state tax refunds to repay the loan.

Legal action

The government may take legal action against the borrower to collect on the loan, including filing a lawsuit or obtaining a court order.

Negative impact on credit score

Defaulting on a federal student loan can negatively impact the borrower’s credit score, making it difficult to obtain credit in the future.

If a federal student loan goes into default, it can have serious and long-lasting consequences on the borrower’s financial situation and life. It can’t be emphasized enough to pay attention to your loan payments and budget to be able to make them on time.

How can you avoid federal student loan delinquency and default?

You can take various steps to prevent federal student loan delinquency and default.

  • Keep track of your loan repayment schedule and how much you must pay each month with a calendar
  • Set up automatic payments or reminders to ensure you make your monthly loan payments on time
  • If you’re struggling to make your loan payments, consider enrolling in an income-driven repayment plan which can help lower your monthly payments and make them more affordable
  • Suppose you are experiencing financial hardship or other circumstances that make it challenging to make your loan payments. In that case, you may be eligible for a deferment or forbearance, which can temporarily suspend your loan payments.
  • If you move or change your phone number or email address, update your information with your loan servicer immediately

By taking these steps, you can avoid federal student loan delinquency and default and keep your student loan payments on track.

How to recover from delinquency or default?

Recovering from federal student loan delinquency or default can be a challenging process, so it’s essential to take immediate action to avoid further damage to your credit score and financial stability.

Contact your loan servicer

If you’ve missed payments or defaulted on your student loan, contact your loan servicer as soon as possible.

They can provide you with information on your repayment options and help you set up a payment plan that fits your budget.

Consider consolidation or rehabilitation

Consolidating your loans can make it easier to manage your payments by combining them into a single loan with a fixed interest rate.

Rehabilitation is another option to help you escape default by making a series of on-time payments.

Look into forgiveness or discharge options

There are several forgiveness and discharge options available for student loans, such as:

  • Public Service Loan Forgiveness
  • Teacher Loan Forgiveness
  • Total Permanent Disability Discharge

Prioritize your student loan payments

Make sure you prioritize your student loan payments in your budget. If you struggle to make payments, consider reducing your expenses or increasing your income to free up some money.

Monitor your credit report

Delinquency or default on your student loans can damage your credit score, so it’s important to monitor your credit report regularly.

Check for any errors or inaccuracies, and dispute them if necessary.

Seek financial counseling

If you need help managing your student loan debt, consider seeking the advice of a financial counselor.

They can help you understand your options and provide guidance on improving your financial situation.

Find a college planning specialist

College Benefits Research Group can help students and families choose the right college, learn their options for paying for college, and help them navigate through the financial aid application process.

Learning how you will pay for your college education and how much you can afford can prevent you from taking out loans you struggle to repay.

Contact us or check out our blog if you’re interested in our services or joining an upcoming virtual workshop.


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