Defaulting on your student loan has some expected consequences such as being reported to the Credit Bureaus, which will definitely impact your credit score negatively.
You may also find yourself impacted by any or all of these other situations:
• Your federal or state income tax refunds or other federal or state benefits will be used to reduce your loan balance.
• Collection fees and costs, court costs and attorney fees will be added to your loan.
• If you have a state professional license you may lose that license, or be denied one. How ironic is that? You incurred all those student loans to gain a profession and now you will be at risk of losing your license and with it your ability to earn an income from that profession.
• You can lose your eligibility for any other federal student aid and most other federal benefit programs, which may leave you with private loans as your only option. These loans do not generally have as favorable an interest rate as federal loans.
• You can lose your eligibility for loan deferments or forbearance. If you cannot get a deferment or forbearance you will lose the ability to postpone your loan payments in periods of economic hardship or personal emergencies. You want to maintain this option.
• You may be required to repay your entire loan balance at once. Hope you won the lottery.
• You could be sued by your lender. Who wants a long drawn out legal battle which will probably not end in your favor.
• Your wages could be garnished, which means that payments will be forcibly taken from your paycheck.
• You may be unable to consolidate your loans, which means if you have multiple loans, you will have to make at least the minimum payments on each loan, which cumulatively may be an unwieldly amount, and which will increase the length of time to pay off your loans, and the amount of interest on your loan.
Play it safe and make your payments on time.
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