Dangers of Defaulting on Student Loans

Taking out student loans means eventually paying them back. Failing to make your loan payments on time can result in some pretty hefty consequences. When getting your loan, the lender sets legal terms that you sign for in a document. You also agreed to a schedule of paying back the loan. This document, the promissory note, is what holds you responsible to making these payments and not defaulting on student loans.

First Warning

So what happens when you miss payments? For the first few months, your loans are delinquent. You haven’t paid yet, but you still can. When you don’t make your loan payments after the specified number of days written in the promissory note, you are now defaulting on your loans.  At this point, there is a possibility of serious legal consequences.

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Consequences of Defaulting

Once you default, you must pay the full loan repayment amounts you missed. That includes any interest. Another consequence is losing eligibility for a loan deferment. A loan deferment postpones paying loans back depending on certain circumstances.

If you do default, the lender reports your delinquency to credit agencies. In turn, your credit score is hurt. A bad credit score means having a harder time getting a credit card, or buying a house or car. Bad credit can even stop you from signing up for a cellphone contract. Your student loan debts then increase because of late fees, and your loan is sent to a collection agency. These are some pretty severe consequences that can be hard to bounce back from. That being said, we’ve put together some tips to help you out of a situation like this.

If it happens…

If you do end up defaulting on student loans, you should immediately contact the lender of your loan to explain your situation. There are a few different ways you can get the loan out of a default status.

One is to just repay the full amount of the loan that has been defaulted. If you have the means to repay the full amount, do it! The longer you put off repayment, the more fees and interest you’ll accrue, and the more you eventually have to pay back. You can also do loan rehabilitation. Loan rehabilitation requires that you make nine payments on your loan within ten consecutive months. You have within twenty days of the due dates to make these payments. A third option is to consolidate your loan into a Direct Consolidation Loan. However, this option is only available for federal loans. By doing this, you must agree to either pay the loan back according to an income-driven repayment plan or make three consecutive, full payments on the defaulted loan before consolidating it.

We know that understanding loans can be tricky sometimes. Between the jargon and potentially complicated repayment, student loans can get overwhelming. That’s why we’ve got great resources to help you understand student loans better. You can find out and learn more about student loans.


Lender Rates (APR) Eligibility
Earnest company logo.
Variable APR: 1.88% - 5.64%*
Fixed APR: 2.44% - 5.79%*
Undergraduate and Graduate
Lendkey company logo.
Variable APR: 1.90% - 5.25%*
Fixed APR: 2.49% - 7.75%*
Undergraduate, Graduate, Parent PLUS
Credible company logo.
Variable APR: 1.80% - 9.99%*
Fixed APR: 2.15% - 9.99%*
Undergraduate and Graduate
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Variable APR: 1.64% - 5.65%*
Fixed APR: 2.25% - 5.75%*
Undergraduate and Graduate
Commonbond company logo.
Variable APR: 1.96% - 7.02%*
Fixed APR: 2.59% - 6.94%*
Undergraduate, Graduate, Parent PLUS
Fixed APR: 2.44% - 5.97%*
Undergraduate, Graduate, Parent PLUS
VISIT ISL Education Lending
Variable APR: 1.87% – 5.33%**
Fixed APR: 2.30% – 5.96%**
Undergraduate, Graduate, Parent PLUS
VISIT Nelnet
Variable APR: 2.94% - 4.84%*
Fixed APR: 2.99% - 4.94%*
Undergraduate and Graduate
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Variable APR: 1.86% - 6.01%*
Fixed APR: 2.47% - 5.99%*
Undergraduate and Graduate, Parent PLUS

*APR includes a 0.25% interest rate reduction for enrollment in automatic payments.

**Interest rate reduction of .25% for automatically withdrawn payments from any designated bank account (“auto debit discount”). Auto debit discount applies when full payments (including both principal and interest) are automatically drafted from a bank account. The auto debit discount will continue to apply during periods of approved forbearance or deferment if the auto debit discount was in effect at the time of receiving the forbearance or deferment. Auto debit discount will remain on the account unless (1) the automatic deduction of payments is canceled or (2) there are three consecutive automatic deductions returned for insufficient funds at any time during the term of the loan.

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