When Does Student Loan Default Occur?

If you fall behind on your student loan, you may not be in default.

The answer depends on whether the student loan is federal or private. But first, you need to understand the concept of default.

What Is Default?

A default is, technically speaking, a failure to meet the legal obligations of a loan.

The simplest type of default occurs when you fail to make your payments on time. But default can technically happen if there’s any obligation whatsoever in a loan agreement that you fail to make.

For example, mortgage loans may require you to maintain homeowners’ insurance. Fail to keep the policy in place and you’re considered to be in default of your obligations.

When Does A Student Loan Go Into Default?

Federal student loans don’t go into default when you miss a payment. In fact, If you repay your loan monthly, then default occurs when you fail to make a payment for 270 days. For the rare FFEL loan that requires payments to be made more often than once a month, you go into default if you fail to make a payment for 330 days.

Private student loans are different – remember, they’re no different than any other installment loan or consumer debt. You’ll need to look at the loan agreement to determine when default occurs, but it usually happens as soon as you miss a payment.

How To Prevent Default

When it comes to private student loans, you can avoid default only by making your payments on time. If you can’t meet that obligation, you’ve got no legal way to prevent yourself from going into default.

For federal student loans, however, there are programs available to keep you out of default. Consider deferment or one of the extended or income-based repayment options to make it easier financially. Start by calling your student loan servicer to investigate your alternatives. If that doesn’t work, calling a student loan lawyer like me may shed some light on the situation.

If You’re In Default

Default comes with some severe consequences.

For federal student loans, those consequences come without the need for a lawsuit and include tax refund offset, bank account freezes, and wage garnishment. Read more about the consequences of defaulting on your federal student loans here.

Private student loan default triggers collection activity and often a lawsuit. The lawsuit, if you don’t fight it, yields a judgment that can also cause wage garnishment and other enforcement actions.

If you find yourself in student loan default, keep an open line of communication with the lender as well as any collection companies. Work with the lender to come to an agreement on structuring payments, but if that fails then it’s time to talk with a lawyer and protect yourself before it’s too late.

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About the Author:

I've been a consumer protection lawyer since 1995, working to help people end their bill problems. I'm a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.