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Federal Loan Default

It's extremely important to understand that you, and only you, are responsible for repaying the federal loan funds you've borrowed. This is true even if you fail to graduate with a degree, have difficulty locating employment, or if you're not satisfied with your educational experience. If you do not make the required payments on your loan obligation according to the terms of the legal promissory note you signed, and do not apply for a forbearance or a deferment, your loans can go into default, which has serious consequences. In addition, federal student loans are not dischargeable through bankruptcy.

If you default on a federal loan...

  • your loan may be turned over to a private collection agency to recover the money you owe,
  • you'll be liable for any costs incurred to collect on your defaulted loan, including late fees, court costs and legal/collection fees,
  • you can be sued for the entire amount of your loan,
  • your employment wages can be garnished,
  • your state and federal income tax refunds may be withheld,
  • your credit history will be negatively impacted, making it difficult to purchase a vehicle or home, and/or
  • you'll be ineligible to receive any additional federal or state financial assistance until your defaulted loan is fully satisfied.

Defaulting on a federal student loan is very serious. Here's how to prevent default from occurring...

  1. Make sure you understand your borrowing responsibilities and options.
  2. Always make your loan payments on time.
  3. Promptly notify the UCM Office of Student Financial Services of any changes to your name, address, or any other information that may impact repayment of your loan.
  4. If you begin to have difficulty with your loan payments, consider applying for a forbearance or a deferment. Don't wait! These options are not available to an individual whose student loans have already gone into default.
  5. Consider consolidating your federal student loans into a single educational loan, with one interest rate and one monthly payment.
  6. Maintain accurate records of your loans, as well as all the other financial assistance you received while pursuing your education.

Need more information? The U.S. Department of Education publishes a guide to help students with repaying their defaulted loans. In addition, you're always welcome to contact the UCM Office of Student Financial Services.