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Default Prevention

   

Paying Your Loans Back

If you fail to make the required payments on your federal student loan and the account becomes 270 days (approximately nine months) delinquent, it is in default, and the guaranty agency will purchase the loan from your holder. Once the loan is placed in a default status, the entire balance (principal, interest, and collection fees) is immediately due and payable to the guaranty agency.

Student loans, including PLUS (parent) loans, need to be taken out with an ocean of fear, a sea of trepidation and a mountain of understanding. Only then will one borrow responsibly. Contrast this approach to the borrowers who make uninformed and hasty decisions. They are the ones who over borrow and borrow unwisely. The borrowing is easy. The repayment is not.

Consequences of Default

The consequences of default are serious:

  • You may be subjected to court action requiring total payment of your loan.
  • Your credit rating can be severely damaged, making it difficult to borrow money for a car or home, or to receive credit cards. The default status can remain on your credit report for several years after you pay the loan in full.
  • Your federal Treasury payments (including federal tax refunds) and state income tax refunds may be withheld.
  • Up to 15 percent of your disposable income can be garnished (administrative wage garnishment) without a court order.
  • You won't be eligible to receive any more federal financial aid (and possibly state aid) unless you make acceptable arrangements to repay what you already owe.
  • You may be ineligible for assistance under more federal benefit programs.
  • You will be ineligible for deferments or forbearance.
  • You will be liable for the costs associated with collecting your loan, up to 25 percent of your principal and interest balance, plus court costs and attorney fees.
  • You may not be able to renew a professional license you hold or may jeopardize your chances for certain types of employment.
  • Your loan may be assigned to a professional collection agency.

Prevent Default

Default can be avoided! Remember the following:

  • Before you take out a loan, make sure you fully understand your options and responsibilities. A student loan can be a valuable tool to help you realize your educational and career dreams; however, it should be the last option. You should explore and use scholarships, grants, work-study, part-time jobs, and family contributions first to finance your education.
  • Don't borrow more than you need or more than you expect to be able to repay. Develop a sound and realistic financial plan.
  • Make your loan payments on time and notify your lender or servicer when you move or change your address. Contact your lender or servicer immediately if you start to have problems repaying your loan. They may be able to provide you with some financing options and give you information about deferments and forbearance.
  • Keep a record regarding your loan. Make copies of all letters, canceled checks, and any forms you sign.

Default Prevention Tools

Information for Defaulted Borrowers

Repaying Your Loans

Forbearance/Deferments

Student Access

Baton Rouge Community College does not discriminate in its educational and employment policies and procedures with regard to race, color, religion, sex, sexual orientation, national origin, age, disability, genetic information, or veteran status.