If you have finished your schooling it is important that you repay your federal student loans on time. Some parents and students who fail to pay their dues within 270 days from the date of payment end up in the list of people with Defaulted Student Loans. If you have borrowed from an aggressive lender then the lender is bound to go behind the guarantor in you default on paying your dues.

There are several ways by which the lender can collect loan payments from you

a) The lender can approach the US treasury to offset the refunds due, both federal and state refunds, against the loan dues

b) Lender may not want to be personally involved in collection of loans. The lender may approach a private collection agency to collect the loans on behalf of lender. In such circumstances the lender may add 25 per cent to the loan outstanding as collection and penal charges

c) An amount of up to 15 per cent of disposable income could be garnished from your pay check.

d) If the lender takes you to court you need to pay the lender the principle amount due plus the interest outstanding plus the advocates fee (both yours and the lenders advocate) plus the court fee. I don’t have to remind you the high fee which most advocates charge today.

e) The worst part about not paying your dues on time is that credit rating agencies are notified about the default. Such information of default will be reflected in your credit report for a minimum period of 7 years.

There are penalties for people who have defaulted student loans. Some of the penalties are

A) You will lose and forbearance and deferral rights

B) You will not be entitled to receive any fresh federal aid.

C) Most lenders will ask you to repay the entire loan taken when you default on your payment.

The worst part on defaulted student loans is that even if you repay your loans in full the default will be noted in your credit report and will be a black mark at least for 7 years.

Default on federal loans is best avoided if at all it is possible. If you are in a difficult financial situation I suggest you speak to your lender how will rework on your repayment plan so it becomes easier for you to repay the lender. You can also opt for student loan consolidation to change your payment plan. This will not only increase your repayment period but also help in reducing the rate of interest. You can contact Federal Education Services who will help you consolidate loans and save you from falling into loan default abyss.