| Once you have left school and your federal student | | | | • Credit agencies notified - a defaulted loan |
| loans are in repayment it is important to make your | | | | stays on your credit report for a minimum of 7 |
| payments on time. Some students and parents get | | | | years. |
| behind on their Stafford loan, PLUS loan or Graduate | | | | Other penalties when your Stafford, PLUS or |
| PLUS loan payments, feel overwhelmed, and before | | | | Graduate PLUS loans enter default: |
| you know it you haven't made a payment in 270 | | | | • You lose any deferral and forbearance |
| days and your loans have gone into default. Your | | | | rights |
| lender must make an aggressive effort to collect but | | | | • You cannot receive any further federal aid |
| if that fails your loan is turned over to the guarantor. | | | | • Generally your loan is due in full upon |
| Now it starts getting expensive. | | | | defaulting |
| The guarantor has several options at their disposal | | | | Even if you pay your federal loan off it will still be |
| for collecting your loan payments | | | | noted as defaulted, paid in full on your credit report |
| • US treasury offset - your federal and | | | | and counted as a black mark. |
| state income tax refunds may be garnished. | | | | Defaulting on your federal loan must be avoided if at |
| • Turn the loan over top a professional | | | | all possible. If you are having trouble making your |
| collection agency - fees and penalties may be up to | | | | payments contact your lender, they may be able to |
| 25% of the total principal and interest due. | | | | help you work out a payment plan you can afford. |
| • Wage garnishment - your paycheck may | | | | Consolidation may be your best option in the long |
| be garnished for up to 15% of your disposable | | | | run, it lengthens the term of your loan which lowers |
| income. | | | | the payments and has several repayment plans to fit |
| • Legal action - you can be sued for the | | | | anyone's budget. Contact Federal Education Services |
| balance of the loan plus court costs and lawyers | | | | about a Stafford, PLUS or Graduate PLUS loan |
| fees. | | | | consolidation before you slip into the default abyss. |