What happens if you default on the student loan? The government actually has a very powerful tool that it uses on those borrowers who do not make student loan payments. The tools that are used by the government include…

Tax refund offsets

IRS can intercept any entitled income tax refunds until you have completed repaying your student loan. This is the popular method that is used in collecting defaulted loan. Actually, the Department of Education collects hundreds of millions annually with this method. There are instances that you can use to challenge the tax income offsets that is if you know how. This mostly requires the assistance of the attorney.


Garnishing your pay check

This is where the government takes a limited portion of the wages of the student loan debtor who has defaulted on the repayment plan. This can be up to 15 percent of the disposable income. However as much as it can do this, it cannot take more than an equivalent of 30 times current federal minimum wage. Just like in the tax refund offset, you can also object to the wage garnishing. Alternatively you can contact your loan holder and negotiate another repayment schedule.

Taking federal benefits

This is where the government takes federal benefits payments like social security disability benefits and social security retirement benefits. However, it cannot take the supplementary security income. These are taken as reimbursement for the student loan.
However, the government cannot also take any amount that will leave you with less than $9,000 a year benefits. Consequently it cannot take more than 15 percent of the total benefit.

Getting sued

The private lenders and the government can sue you in order to collect the defaulted student loans. However, unlike other debts, in this case there is no time limit, so the suit to collect the loan can be indefinitely. . You can learn more about defences on lawsuits for student borrower assistance website.

How to get help

If you are in need of help with defaulted loan you can contact Department of Education or visit the website. However, you must take necessary steps to ascertain that there are no problems on your own.
One thing that you need to know is that every student loaner is responsible for the loan whether or not they graduate, do not get a job after graduating or dropped out of school. There are serious consequences to defaulting on the student loan.

9 Consequences of a Student Loan Default

  1. Lose of eligibility for forbearance, deferment and repayment plans.
  2. Lose of eligibility for additional student aid from the federal government.
  3. The loan account is then assigned to a collection agency.
  4. The whole unpaid balance of the loan and any interest are due and payable.
  5. Loan is reported as a delinquent to credit bureaus affecting your credit rating- affects you ability to get mortgage, car, or credit card.
  6. State and federal tax refunds are withheld (tax offset).
  7. Student loan debt increases due to additional interests, late payments, collection fees, court costs and attorney cots among other costs.
  8. Loan holder file for legal action which can stop sale of any assets or purchases one by you.
  9. The employers can withhold money from the pay and send to the government (wage garnishing).