Defaulting on Student Loans: What It Means and How to Avoid It

3 min read
June 21, 2016

Defaulting on Student Loans

If you’ve ever been in a tough spot and thought that your student loan payment would be an easy bill to skip, think again. Defaulting on your student loan can bring disastrous financial consequences -- but there are often mechanisms in place to help you out when making payments becomes difficult.

When you might not be able to make your loan payments, the worst thing you can do is ignore the situation. Here’s what you need to know about defaulting on student loans, and how to prevent it from happening.

What Does Defaulting Mean?

The default period is defined differently by each loaning institution, but ultimately defaulting comes down to missing many payments in a row. Most federal student loans go into default after 270 days (about 9 months) of no payments.

Are There Alternatives to Defaulting?

The instant you think you might not be able to make your student loan payments, it’s time to work on an alternative. The earlier you act, the more solutions will be available to you.

Don’t wait until it’s too late. You aren’t the first one to go through this situation, and there are policies and procedures to help.

These are the most common alternatives when it becomes too difficult to make your student loan payments:

  • Get a different payment plan. Call your lender and find out if there are other payment plans you can get on, like an income-based one. There may be a plan that offers lower payments.
  • Change your payment date. Ask your lender if you can shift the date your payments are due. Start paying your student loans right after your paycheck comes in, or have your lender set the due date to one that lands when you’re more likely to have money to cover it.
  • Consolidate your loans. If you’ve got multiple loans, it may be easier to consolidate them into one payment, which you can then structure using one of the other options on this list. This option isn’t for everyone, but it’s worth looking into if you have multiple loans with high-interest rates.
  • Request a deferment or forbearance. If you qualify for a deferment or forbearance, you’ll be able to stop or significantly reduce your loan payments for a limited period of time (e.g. 12 months).

Once you’ve actually defaulted, the vast majority of these alternatives disappear. That’s why it’s absolutely critical to get help as soon as you think there might be an issue.

What Are the Consequences of Defaulting on Student Loans?

You’ll face some significant financial and even legal consequences for defaulting on your student loans. Once it’s 90 days past due, your loan will be sent to a collection agency and your credit score will go down.

If your loans are federal, you may be subject to tax refunds being withheld, wages being garnished, and/or federal benefits being cut.

As if that weren’t enough, it’s possible that you won’t be able to renew your professional licenses when you’ve defaulted on a student loan. And the threat of being sued by any lender won’t ever go away -- the ability to sue for unpaid student loans never expires.

How Can You Get Out of Default?

There are a few options for getting your student loan out of default, and they’ll need to be discussed with your lender. You may be able to consolidate your loans and start making payments that way, or set up a new payment plan based on your current income.

Federal loans in default may be eligible for a rehabilitation program. Paying the total of the loan in full is always an option, too.

The important thing is to catch yourself as far upstream as possible when you’re having trouble with your loan payments. The earlier you ask for help, the more options you’ll have -- and the better your financial future will be.


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About the Author: Ashley Gainer is a freelance writer specializing in money and entrepreneurship. You can find her online at or on Twitter @ageditorial.