Loan Repayment Concerns


What happens if I can't afford to repay my federal student loans?
What happens if I stop paying my federal student loans?
What happens if I default?
Where can I go for help with repayment problems?

What happens if I can't afford to repay my federal student loans?
When you realize you can't afford to repay your student loans, the first thing you should do is get in touch with your lender or loan servicer and explain your situation.

The easiest solution may be to arrange a different repayment plan, which will reduce the amount you owe each month. It will probably mean you pay more interest over the life of your loan, but that's a small price to pay for staying current on your obligation.

If you have a Federal Direct Loan, you may qualify for a deferment or forbearance. Although there are differences between them, both allow you to stop paying for a period of time, which should give you time to get back on your feet financially. Start by investigating deferment, but even if you've applied, go on paying until the relief is granted.

If you simply stop paying, you default. That has serious consequences, including a damaged credit rating, difficulty borrowing in the future, and added cost since student loans are rarely forgiven if you default.

What happens if I stop paying my federal student loans?
If you don't make regular payments on your federal student loans when they are due, you'll face a number of penalties that will increase the amount you owe and interest will continue to accrue.

You'll also be contacted regularly by your loan servicer, seeking repayment, and your failure to pay will be reported to the national credit reporting agencies. This will harm your credit rating.

If you don't resume paying, you'll be in default in between 270 and 360 days.

What happens if I default?
If you default by failing to make your loan payments according to the terms of your promissory note, your lenders can take legal action to recover what you owe.

  • You will not be eligible for additional federal student aid if you want to return to school.
  • Loan payments can be deducted from your paycheck.
  • Federal and state income tax refunds can be withheld to help repay what you owe.
  • You will be charged late fees and collection costs, increasing your debt.
  • You can be sued to recover your debt.
  • In addition, your credit report and credit score will be harmed, making it difficult if not impossible to borrow for any reason and possibly preventing you from buying a car, buying or renting a home, obtaining a job, or buying insurance.

Where can I go for help with repayment problems?
Start by consulting your lender, loan servicer, or the Student Finance department at your school about your options. If you need to find the servicer for Direct or PLUS Loans, log into NSLDS. For Perkins Loans, the servicer is your college or university. Remember, though, that most solutions are available only if you have not defaulted.
 
If you default, your credit score will be harmed, making it difficult if not impossible to borrow for any reason and possibly preventing you from buying a car, buying or renting a home, obtaining a job, or buying insurance.