Student Loan Default

As college becomes more expensive and college loans become a larger debt than expected, there are ways to keep your head above water and not default on your student loan. Graduating from a great school does not always guarantee a great job with a comfortable income. Sometimes that comes years later but student loan repayments can not wait that long. Even missing one payment, you risk falling so far behind and you soon find there is no logical way to keep up and get back on track. Your credit will suffer and you find it becomes a struggle to get credit or other types of financing.

Defaulting on a student loan involves missing nine straight months of payments on your loan. Your lender may turn your account to a third party collection agency which will probably tack on heavy penalties and charges until your debt is satisfied. Because college loans may run in the thousands of dollars already, you are potentially facing an even greater debt than you initially started with. In addition to the fees and charges, you could be sued for repayment. You may also face wage garnishment and up to 10% of you paycheck can be taken to repay your loan agreement. Any income tax refund you expect will be seized as well. If you even planned on returning to further your education, you can forget about qualifying for any other financial aid. In addition to all the action that can be taken against you, you also need to repay the loan in its entirety.

Before you fall into a default status, there are two avenues you can take to ensure your account does not go into default and get turned over to a third party collection agent. Both options are relatively uncomplicated and all you need to do is contact your student loan lender for details on how you can take advantage of the options.


A deferment is basically temporary relief from paying your debt for up to three years. You can usually take a deferment more than one time over the life of the loan depending on your situation, as long as the time period does not extend past the deferment term. You will still be responsible for repaying the interest that has accrued during the deferment period, unless you loans have been subsidized by the government. In order to qualify for a deferment, your lender typically will require you to fill out an application and get approved before the deferment will take place. Until the time of approval, you must continue to make your monthly payments on time. You can not file for a deferment if you have already defaulted on your loan.


Forbearance is an option for people who do not qualify for a deferment but still need assistance in making monthly payments. Like the deferment, you are still responsible for paying accrued interest, however subsidized loan holders are also required to pay the interest. A forbearance period only can run for a one year time period or less but you can renew it for up to a period of three years.

Qualification for both will depend on your working status, your income to debt ratio, and your situation of financial hardship. You may also be considered qualified if you serve as an AmeriCorps volunteer or participate in a public service volunteer program. Qualifications are dictated by each individual lending company and you should contact you lender for the most up to date information and application packages.