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Loan Default Prevention

Understanding Delinquency and Default

Delinquency - If you stop making payments on your student loan, your account will become delinquent. A delinquent loan can result in late fees, affect your credit, and prevent you from receiving future financial aid funding.

Default is a legal term used when a borrower fails to repay a loan according to the terms of the signed promissory note. For a Federal Direct Student or Parent Loan, default occurs when the borrower fails to make a payment for 270 days under the normal repayment plan and has not requested deferment of payment according to the Department of Education's standards.

If you don’t make your loan payments, and your loan is delinquent, you risk going into default. Defaulting on your loan has serious consequences.

Options after Default

You have three options to remove the default status: paying the loan in full, rehabilitation or consolidation.

  • You can pay your loan in full. This is the fastest way to resolve your defaulted loan status.
  • You can rehabilitate a loan by making nine voluntary, consecutive monthly payments on time. During rehabilitation, you can regain eligibility for financial aid after making six voluntary, consecutive monthly payments on time.
  • You can consolidate by combining all your federal education loans. Consolidating is an option as long as the loans are currently in a grace period or repayment status. 

National credit bureaus can be notified of your default, which will harm your credit rating, making it hard to buy a car or a house. You will be ineligible for additional federal student aid.

Loan payments can be deducted from your paycheck. State and federal income tax refunds can be withheld and applied toward the amount you owe. You will have to pay late fees and collection costs on top of what you already owe to the Department of Education.

Exit Loan Counseling

As a student loan recipient, you are required to complete an exit counseling session before you graduate. An exit interview is a loan counseling session in which students are advised regarding their rights and responsibilities as a student loan borrower. Exit counseling is required when you graduate, drop below a half-time enrollment status, and withdraw from all of your classes. 

You may complete your exit counseling session at the Student Loans website.

Frequently Asked Questions?

What is delinquency?
What is default?
What are the consequences of default?
If I’ve missed payments, how do I avoid going into default?
What should I do if my loan is in default?
Who is MAXIMUS Federal Services, Inc.?
What if I believe my loans were placed in default in error?


Please use these resources to find out more information on your student loan.

May 26, 2022