Welcome to Default Prevention!
Q. Can I see a summary of my student loans?
A. Our Default Prevention Unit can help. Contact our Default Prevention department at 678-891-3535 or firstname.lastname@example.org
You can also access your loan information by visiting the National Student Loan Data System's (NSLDS) website at NSLDS.ed.gov (external link). To view your loan information, you'll need your Social Security number, date of birth and your PIN from the FAFSA process. The site lists servicers you can contact with your questions and what type of loan(s) you have.
Q. What is a servicer?
A. A servicer is hired by the Department or FFELP lender to collect, monitor, and report student loan payments. Once you have graduated or dropped below half-time status, your student loans enter their grace period. The grace period for Stafford and Direct Loans is a six-month timeframe during which you are not required to make payments on your student loans. Once the grace period ends, your student loans will enter repayment and regular loan payments must be made, unless you have been approved for a different repayment option. The servicer assigned to your loans will contact you to introduce themselves and provide important information about your repayment terms. Make sure your school and servicer have your most current mailing address and contact information. It is your responsibility to notify your school and servicer if your mailing address and contact information changes.
If you have a Direct Loan, a federal student loan that you borrowed directly from the Department through your school, the Department will select who services your loans. The servicer is assigned your loans; the location of the servicer is not dependent on where you went to school or where you live.
Q. How did I become delinquent on my student loans?
A. If you continually fail to make payments on a student loan, you will become delinquent. You may receive calls from the loan holder, guarantor, servicer, or your school asking you to contact them to help resolve your delinquency.
Q. Why am I getting delinquency notices while I'm in school?
A. You may be getting notices if your loan holder or servicer is unaware you're in school or you've had a change in enrollment status. You should contact your servicer, or loan holder immediately to notify them of any changes in your enrollment status such as a school transfer, drop below half-time or change in your graduation date.
Q. What's a deferment?
A. Deferment is an authorized period of time during which you may postpone monthly principal and/or interest payments. The federal government makes interest payments on subsidized Stafford loans during authorized deferment periods. You're responsible for interest that accrues on PLUS and unsubsidized Stafford loans during any deferment and have the option of making interest payments to avoid capitalization.
Q. What's capitalization?
A. If you don't pay the interest that accrues on your loan while you're in school or during a deferment or forbearance, the unpaid interest is added to the principal balance of your loan. Once the unpaid interest is added, it increases the total amount of your loan and the monthly payment.
Q. What's forbearance?
A. Forbearance is an authorized period of time during which a loan holder agrees to temporarily postpone payments or reduce your payment amount if you intend to repay the loan but are having temporary financial difficulties. You're still responsible for the accrued interest during forbearance.
Q. What's the difference between delinquency and default?
A. Delinquency occurs when your loan payment is past due or late.
Default occurs when your loan is delinquent for 270 days or more.
Q. What's a defaulted student loan?
A. Loans are considered defaulted when a borrower fails to repay a loan according to the terms agreed upon in the Master Promissory Note (MPN). This usually happens when payment is at least 270 days late. Default can also occur for failure to submit on-time requests for a deferment or cancellation.
Q. What happens when my student loan goes into default?
A. Defaulting on a federal student loan can result in several consequences, which may include:
- Ineligibility for financial aid or grants until the default is satisfactorily resolved.
- Taking state and federal tax refunds or other federal payments, to be applied to the loan balance.
- Wage garnishment.
- Hold on academic transcripts.
- Reporting the default to consumer reporting agencies.
- Capitalization of accrued interest, increasing the loan balance.
- Assessment of collection costs (approximately 19%) which are added to the loan balance.
Q. When is my default reported to consumer reporting agencies?
A. Defaulted loans are reported 60 days from the date of default.
Q. Can my federal and state tax refunds be taken?
A. Yes. The money will be applied to the balance of your defaulted loan.
Q. How can I get my student loan out of default?
A. You have several options to get your loan out of default status. You can:
- Make a lump sum payment to pay the loan in full.
- Make monthly payments until the loan is paid in full.
- Make and fulfill a settlement offer.
- Rehabilitate your loan.
- Consolidate your loan.
Q. Why are my relatives and friends receiving so many calls?
A. After unsuccessful attempts to contact you about your loan, the school, servicer, or other partners will contact the relatives and friends whose information you provided when you signed your Master Promissory Note (MPN). This is an attempt to provide you with information needed to prevent your Loan from Defaulting. To update your references please contact your servicer.
Q. Can I get a forbearance or deferment if my loan is in default?
A. Defaulted student loans aren't eligible for forbearance or deferment.
Q. What's consolidation?
A. Loan consolidation isn’t the best option for every borrower. Learn more on the U.S. Department of Education website
Consolidation is a loan program that allows borrowers to combine all of their federal education loans into one loan, make a single monthly payment and extend the repayment period (up to 30 years depending on the loan amount). Consolidation loans can make loan repayment more manageable for borrowers with multiple lenders or high loan balances.