Defaulting on a Loan
What is default?
Default occurs when a borrower becomes past due in making a payment on his or her loans.
Maintaining a good credit history is an important responsibility of any borrower and you must develop a habit of meeting your payment schedule.
If facing a large amount of debt, you might be tempted to skip or delay some of your student loan payments. Your loans have been reported to a national credit bureau and are treated like any other form of credit. Remember, a poor credit report will negatively affect your financial reputation for many years; it could keep you from obtaining a car, a mortgage or even a credit card. Moreover, your report could be requested and used as a basis for hiring by your employers, or it could even be used by property, casualty and life insurance companies as a basis for refusing to underwrite your personal property. Therefore, it is most important to do all you can to make your loan payments in a timely manner.
How will I know if I'm in danger of defaulting?
If you miss a payment, your lender will send you a letter reminding you that your payment is late. If your account remains past due, the lender is required to send you warning notices to remind you about your obligation to repay your loans and of the consequences of default.
If you fail to make loan payments on time or if you default on your loans, the consequences are serious:
Remember, if you're having trouble making your payments, call your lender or school. There are a number of options that may be available in circumstances of financial hardship, such as special payment plans or loan forbearance, which is an arrangement to reduce or postpone monthly payments for a specified period during which interest still accrues. In any case, your lender will work with you to help you avoid the serious consequences of default.