- Your defaulted loans will appear on your credit record, making it difficult for you to obtain an auto loan, mortgage, or even credit cards. A bad credit record can also harm your ability to find a job.
- You won't receive any more federal financial aid until you repay the loan in full or make arrangements to repay what you already owe and make at least six consecutive, on-time, monthly payments. (You will also be ineligible for assistance under most federal benefit programs.)
- You'll be ineligible for deferments.
- Federal interest benefits will be denied.
- You may not be able to renew a professional license you hold.
Once a student loan goes into "default" status the full balance of the loan becomes due immediately. It also means that other options for delaying payment, including student loan deferment and forebearance, can no longer be used.
Eventually, unpaid defaulted student loans can have long-term consequences beyond just the loan directly. For example, your credit report will take a hit. Once the loan has been forwarded for collection your wages can be garnished and your federal income tax refunds can be withheld. You also lose your elgibility for other types of federal loans.
Consolidating your defaulted loans into a new loan will show that your old defaulted loans have been paid in full. You will sign a new promissory note, and be able to start from scratch! With only one lender to deal with and one monthly bill, you will find it easier than ever to manage your debt. Also, get reinstated with Deferment and Fobearance options.
