If you are late making your Direct loan monthly payments, your loan will be considered to be delinquent. Delinquencies on your Direct loan payments are reported to national credit bureaus after being 60 days late. After 240 days of being delinquent, the entire loan, including interest, becomes due immediately and in full. Loan default occurs after one is 270 days late. Having defaulted on your loan means that you have abandoned your responsibility to repay the loan.
The consequences of loan default are severe:
- you will become ineligible for additional federal aid including grants and student loans, and state-based assistance;
- you will become ineligible for other student loan benefits such as a deferment or forbearance;
- Hampshire College will not provide you or others official copies of your college transcript;
- it will severely damage your credit rating, making it more difficult to obtain affordable credit in the future, including credit cards, a car loan, or a mortgage;
- defaults are reported to national credit bureaus and can remain on your credit report for seven years;
- more employers and rental agencies are requiring credit checks before hiring or leasing, so your ability to obtain certain types of employment or living situations may be affected;
- your federal tax refunds may be withheld and applied to your outstanding loan balance;
- your savings and checking accounts may be seized to pay your outstanding debt;
- your loan may be assigned to the U.S. Department of Education Collection service;
- you will have to pay additional fees and court costs for the collecting of your loan;
- your employer could be ordered to withhold or garnish a portion of your wages, up to 10%;
- if you need a license to practice in your profession, it may be revoked, canceled, or not renewed;
- there is no statute of limitations, which means your obligation to repay federal loans will never go away.
There is no reason ever to default on your federal student loans. If you find that you are having difficulty making payments you should call your loan servicer immediately. You would be able to request a deferment or a forbearance, or change your repayment plan. Refer to the Tips to prevent loan default section for more information.