Life can get difficult at times. That is why many people end up defaulting on their student loans. If you are having trouble paying your student loans, then it is important to take action before you default. There are many consequences that can happen if you default on your student loan.
If you fail to make payments, then they will be reported to the credit bureaus. This can cause your credit score to drop. The negative marks on your credit report can make it harder for you to get a home or apartment. It can also be hard for you to obtain a line of credit. Additionally, some employers will conduct a credit check before they hire someone.
Additional fees will be added to your unpaid student loan balance if you miss payments.
Transfer to Collections
Your student loan will be transferred to a third-party collections agent if you default. These debt collectors can be annoying and aggressive. They may call multiple times a day. They may also send threatening letters. Additionally, they may contact people who have nothing to do with the student loan.
This is one of the most severe consequences of not paying your student loans. Federal student loan servicers rarely sue people who have defaulted on their student loans.
They have other ways of collecting the missed payment. However, a private student servicer can sue you.
You can get your wages garnished if you do not pay your student loans. Federal student loan providers do not have to obtain a court order. All they have to do is find out where you work and inform them that they will be garnishing your wages. Private student loan providers have to obtain a court order.
Tax Refund Seizure
Your student loan provider can take your tax return if you do not pay. They can through this through the Treasury Offset Program. They will take your tax refund and apply it to the balance.
Social Security Offset
Not only can the federal government take your tax refund but they can also take your Social Security check.
Defaulting on your student loans can have serious consequences, but there are things that you can do in order to get out of a default. There are programs available that can help you catch up on your payments. You may also be able to settle the account for less than what you owe.