What Happens If I Default on a Private Student Loan?

Many of life's circumstances can lead to a default on a private student loan, but it is important to understand the consequences if it happens. If payment is not received on the loan for 270 days and special arrangements have not been made to the lender, then the loan is considered in default. Private student loans are not dischargeable in bankruptcy filings.

Consequences of Defaulting on a Student Loan

  • the loan will be turned over to a collection agency
  • wages may be garnished, or tax refunds intercepted
  • the default private student loan will appear on credit reports as bad debt, lowering credit ratings
  • the lender can sue for the entire amount of the loan, and the borrower will be responsible
  • for all court costs in addition to the loan
  • social security benefits can be withheld
  • further financial student aid will be withheld
  • professional licensing can be withheld or revoked

Preventing Default

It is important to understand the terms of the loans and all dates or deadlines regarding it. Most importantly, payments must be on time and kept current. Refer to the lender for assistance if a circumstance arises that prevents payment, rather than defaulting on a private student loan.


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