Consequences of Default You can no longer receive deferment or forbearance, and you lose eligibility for other benefits, such as the ability to choose a repayment plan. You lose eligibility for additional federal student aid.
If your loan is currently in default, you are not eligible for Public Service Loan Forgiveness. Unfortunately, in order to be eligible for Public Service Loan Forgiveness on your Federal Direct student loans, you have to be enrolled in an eligible repayment plan and consistently making on-time payments.
You may be able to settle federal or private student loans for less than you owe if they're in default and you can't repay them. ... Student loan settlement is possible, but you're at the mercy of your lender to accept less than you owe. Don't expect to negotiate a settlement unless: Your loans are in or near default.
Not paying your student loans will result in them going into default and can pose some serious problems for you including legal and credit issues. For private loans, there is a statute of limitations where the creditor must decide to sue you or lose the ability to force payment from you.
Borrow only what you need to pay for your college expenses. Create a budget to determine how much you really need to borrow. Contact your school's financial aid office to request a lower loan amount instead of borrowing the maximum amount you might be eligible to receive. Complete Financial Awareness Counseling.
Unfortunately, there can be many negative consequences of failing to make your student loan payments, including wage garnishment, a drop in your credit score or a suspension of your professional license.
Public Service Loan Forgiveness
PSLF forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.
A student loan debt settlement can have a negative impact on your credit report and FICO score, since it indicates that you've gone into both delinquency and default on a loan. However, a settlement may be the lesser of two evils and doesn't affect your credit score as badly as a collection or judgment might.
Student loan forgiveness is possible after 20 years if you're only repaying undergraduate loans, or after 25 years for any of the loans you're repaying from graduate school or professional study. Student loan forgiveness is possible after 25 years of repayment.
The loan is wiped after 25 years (30 years in Scotland), or when you're 65 if the loan was taken out pre-2006 for students in England, Wales and Northern Ireland, and pre-2007 for students in Scotland.
Understanding Default
For a loan made under the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan Program, you're considered to be in default if you don't make your scheduled student loan payments for at least 270 days.
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