Consequences of Default

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The consequences, which can be severe, include the following:

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• The entire unpaid balance of your loan and any interest you owe becomes immediately due (this is called "acceleration").

• You can no longer receive deferment or forbearance, and you lose eligibility for other benefits, such as the ability to choose a repayment plan.

• You will lose eligibility for additional credit at a later time.

• The default will be reported to credit bureaus, damaging your credit rating and affecting your ability to buy a car or house or to establish additional credit.

• Your tax refunds and federal benefit payments may be withheld and applied towards repayment of your defaulted loan (this is called “Treasury offset”).

• Your wages will be garnished. This means your employer may be required to withhold a portion of your pay and send it to your loan holder l to repay your defaulted loan.

• Your loan holder can take you to court.

• You may not be able to purchase or sell assets such as real estate.

• You may be charged court costs, collection fees, attorney’s fees, and other costs associated with the collection process.

• It may take years to reestablish a good credit record.

• This establishment may restrict benefits that you had access to in the past.