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What happens when you default on student loans?

13 consequences — plus what you can do if you're months behind on repayments.

Updated

Fact checked
Student loans might be more flexible than other types of financing. But the consequences of falling behind on your repayments can be particularly harsh — especially if you have federal loans.

It can take years to rebuild your credit after default and have unexpected repercussions. And while there are several ways out of default, there are better alternatives.

How do I know if my student loans are in default?

Student loans are in default after being late on a repayment for a specific period of time. How late depends on your lender, though it’s generally at least several months.

Federal student loans in default

Most federal student loans are in default after you fail to make a full repayment for 270 days or longer. The one exception is the Perkins Loan program. In that case, your loan is considered to be in default as soon as you’re late on one repayment.

Private student loans in default

Typically, your loan is considered to be in default after you’re more than 60 to 90 days late on a repayment, though it depends on your lender.

Often, you can find out when your loan is considered to be in default by looking at your promissory note. If it’s not mentioned there, figuring out your lender’s default policy can be tricky. Have your account number on hand before contacting your lender’s or servicer’s customer service team to get the quickest answer.

13 consequences of defaulting on your student loans

Defaulting on your federal student loans comes with the heaviest consequences, though nonpayment on private student loans can do some real damage to your personal finances as well. Here’s what could happen.

What states seize licenses over defaulted federal student loans?

Losing your driver’s or professional license over defaulted federal loans is only a risk in a handful of states. But if you live in one of these states, you could also lose other licenses, like those required for hunting or fishing.

Some states haven’t enforced these laws, while others have no official regulations on the books but allow licensing boards to act according to their own rules.

You might want to take extra precautions to avoid default or act fast to get out of it if you live in one of the following states:

  • Alaska
  • Arkansas
  • California
  • Florida
  • Georgia
  • Hawaii
  • Illinois
  • Iowa
  • Kentucky
  • Louisiana
  • Massachusetts
  • Minnesota
  • Mississippi
  • New Mexico
  • North Dakota
  • South Dakota
  • Texas
  • Tennessee
  • Virginia
  • Washington

How will defaulting on my student loans affect my cosigner?

Student loan cosigners are legally responsible for paying off the student loan if the borrower can’t. So if you miss a repayment on a student loan, your servicer will likely contact your cosigner to request repayment.

If neither of you make repayments long enough for it to go into default, they could have the same negative consequences that you face, including having their wages garnished.

What is the statute of limitations on student loans?

The statute of limitations on student loans — how long your lender has the legal right to sue you for repayment — varies depending on where you live and what type of student loans you have.

Statute of limitations on federal loans

Federal student loans have no statute of limitations. This means the government can sue you for repayment if you default. However, you have more options to get out of default on federal student loans than with student debt from a private lender.

Statute of limitations on private loans

The statute of limitations on private loans varies by state, depending on the local laws for promissory notes. It can range anywhere from three to 10 years.

However, the statute of limitations can reset if you start making repayments again. And your credit will continue to suffer until you pay off all of your student debt.

I defaulted on my student loans. What can I do?

There are several steps you can take if you’ve defaulted on your student loans:

  • Sign up for student loan rehabilitation. If you’re a federal loan holder, you can get your loan out of default by making 10 consecutive repayments based on your income that are no more than 20 days late. Contact your servicer to get started or check out our guide to signing up for federal student loan rehabilitation.
  • Apply for a federal Direct Consolidation Loan. You can also hit the restart button on your defaulted federal student loans by consolidating them into one. This option lets you pick a new, more affordable repayment plan and even change servicers.
  • Consider refinancing with a private lender. Private student loan holders might be able to refinance with another lender — though many require you to be current on your student loan repayments. And you might only qualify with a cosigner.
  • Repay your loan in full. If refinancing is impossible and you don’t have a federal loan, paying off your loan in full might be your only choice — if you have the funds.

Compare student loan refinancing options

Data indicated here is updated regularly
Name Product Min. Credit Score Max. Loan Amount APR
EDvestinU Private Student Loans
675
$200,000
4.092% to 8.609% with autopay
Straightforward student loans for undergraduate and graduate students.
CommonBond Private Student Loans
700
$500,000
3.31% to 9.74%
Finance your college education through this lender with a strong social mission and terms that fit your budget.
Edvisors Private Student Loan Marketplace
Varies by lender
Varies by lender
Varies by lender
Quickly compare private lenders for your school and apply for the right student loan.
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Compare up to 4 providers

Bottom line

Defaulting on your student loans has consequences that stretch way beyond a poor credit score. And if you have private student loans, you might have strictly limited options to get out of default besides paying your debt in full.

Learn more about how to refinance your student loans or federal loan rehabilitation by reading our guides.

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