What are the penalties for defaulting on a student hardship loan?

Taking a student hardship loan is a huge financial risk. You are taking one loan to pay off the balance of another. This will place you in a high amount of debt, and it may compromise your credit score. Typically, borrowers take these loans only if they are delinquent on their student loans and already facing financial challenges. A default on a student hardship loan can be detrimental. Not only will you default on the secondary loan, but you may also be at risk of defaulting on the primary student loans. The result can be a severely compromised credit score, loss of any collateral placed on the loan, and the inability to get a new loan, for school or otherwise, in the next two to five years.

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