Consequences+of+Defaulting+Loan

__ **Consequences of Default** __
If you default on your student loan: And of course, you will still owe the full amount of your loan.
 * Your loans may be turned over to a collection agency.
 * You'll be liable for the costs associated with collecting your loan, including court costs and attorney fees.
 * You can be sued for the entire amount of your loan.
 * Your wages may be garnished. (Federal law limits the amount that may be garnished to 15% of the borrower's take-home or 'disposable' pay. This is the amount of income left after deducting any amounts required by law to be deducted. The wage garnishment amount is also subject to a ceiling that requires the borrower to be left with weekly earnings after the garnishment of at least 30 times the Federal minimum wage, per 34 CFR 682.410(b)(9), 34 CFR 34.19(b) and 15 USC 1673(a)(2).)
 * Your federal and state income tax refunds may be intercepted.
 * The federal government may withhold part of your Social Security benefit payments. (The US Supreme Court upheld the government's ability to collect defaulted student loans in this manner without a statute of limitations in Lockhart v US (04-881, December 2005).)
 * Your defaulted loans will appear on your credit history for up to 7 years after the default claim is paid, making it difficult for you to obtain an auto loan, mortgage, or even credit cards. A bad credit record can also harm your ability to find a job. The US Department of Education reports defaulted loans to TransUnion, Equifax and Experian.
 * You won't receive any more federal financial aid until you repay the loan in full or make arrangements to repay what you already owe and make at least six consecutive, on-time, monthly payments. (You will also be ineligible for assistance under most federal benefit programs.)
 * You'll be ineligible for deferments.
 * Subsidized interest benefits will be denied.
 * You may not be able to renew a professional license you hold.
 * You may be prohibited from enlisting in the Armed Forces.

__**Defaulting on Private Student Loans**__
There are some differences between defaulting on federal student loans and private student loans. While federal education loans define a default as occurring after 270 days of non-payment, for private student loans a loan is considered in default after 120 days of non-payment. Private student loans also have fewer tools for averting default. For example, the forebearance period on a private student loan is usually no more than a year, in six month increments. Most private student loans do not have discharges for death or total and permanent disability of a borrower. (Sallie Mae's Smart Option Loan, New York HESC's NYHELPs and all Wells Fargo private student loans provide a death and disability discharge.) Private student loans cannot attach federal and state income tax refunds or prevent the renewal of state licenses, but they can sue under state loan to garnishee wages to repay a defaulted debt. They are also excepted from discharge by bankruptcy unless the borrower files an undue hardship petition that is granted by the court.