Avoiding Default

Need Help Paying Your Student Loan?

A loan, unlike a grant, is borrowed money that MUST be repaid.

There are severe consequences for not repaying your loan, but there are several options to help you avoid these penalties.

Understand Your Student Loan Responsibilities:
You must repay your loan even if you did not like the education you received or are unable to obtain employment after you graduate.

You must keep the servicer informed of any change in your name, address, phone number, Social Security Number or enrollment status.

You must make payments on your loan even if you do not receive a bill or repayment notice. Billing statements are sent to you as a convenience, but you are obligated to make payments even if you do not receive any reminders.

You can repay the whole loan or any part of it at any time without penalty. This means you are paying some of the loan before it is due.

If you apply for deferment, forbearance or consolidation, you must continue to make payments on your loan until you have been notified that your request has been processed and approved.

Your student loan account balance and status will be reported to the national credit bureaus on a regular basis. Just as failing to repay your loan can damage your credit rating, repaying your loan responsibly can help you establish a good credit rating.

Avoiding Student Loan Default

Defaulting on a Student Loan can be a serious negative mark on not only your credit score but on your adult career path.

Click on the image to access Frequently Asked Questions about student loan repayment.

Be aware of the consequences of defaulting on your student loan:
Consequences of defaulting on a federal student loan are severe and long-lasting. Possibilities include:

  • loss of federal and state income tax refunds
  • garnished wages
  • ineligibility for Title IV Funding (student aid)
  • employment opportunities could be jeopardized
  • negative credit rating
  • difficulty in obtaining housing (rent, mortgage)
  • difficulty in obtaining auto loan
  • loss of professional license

Your loan can default from a lack of paperwork as easily as from a lack of payment. For that reason, it is important to keep your loan holder informed of any changes in your status, as well as your current address and a daytime phone number.

Repayment Options Can Keep You on Track

There are many repayment options to help students avoid loan default. The following are answers to the most common questions.

What are the repayment options?

There are several valid options which offer temporary relief to individuals who are having trouble repaying their student loans.

Standard Repayment Schedule
With the Standard Repayment Schedule plan, your loan is repaid in equal monthly payments over a 10-year period or 120 equal payments. The minimum monthly payment is $50, but the actual monthly cost depends on your loan balance and interest rate.

Extended Repayment Plan
An extended plan allows you to stretch your repayment period up to a maximum of 25 years. To be eligible for this plan, you must have an outstanding loan balance of more than $30,000.  This is a good plan if you need to make smaller monthly payments. Payments will be less than with the standard plan. However, you may pay more in interest because you are taking longer to repay the loans. Remember that the longer your loans are in repayment, the more interest you will pay.

Graduated Repayment Schedule
A Graduated Repayment plan is ideal if you have a limited income today but expect to have higher earnings in the future. The monthly payments begin low and increase gradually as your income increases. The initial monthly payments must be high enough to cover each month’s interest. This option may increase the total amount you will be required to repay as more interest may accrue over the life of the loan.

Income Sensitive Repayment Schedule
An Income Sensitive plan allows you to pay based on your income. You will be required to provide proof of your gross income, and your servicer will calculate the amount you should reasonably be able to pay. To stay on the Income Sensitive Repayment Schedule, you will have to provide your servicer with proof of income annually. Your repayment amount will be adjusted each year based on your gross income. This option will increase the total amount of your loan and may extend your repayment period.

Income Based Repayment
Monthly payments are capped at a percentage of the borrower’s discretionary income.  The monthly payment is based on income, family size and total amount borrowed. Click here for a calculator that will assist you in estimating your monthly payment amount under the income-based repayment plan.

What are other options to avoid default?

Options such as deferment or forbearance may be available to assist you.

A deferment allows you to postpone student loan payments for a specified amount of time.  You are still responsible for the loan, and, at the end of the deferment, the loan will enter repayment.  You may be responsible for payment of the accrued interest on your account while you are in a deferment status. Consult with your student loan servicer to determine if you are responsible for the interest during the deferment period. At the expiration of the deferment, you will be responsible for making payments.

Deferments you may be eligible to receive include:

  • Economic hardship
  • In-School enrollment
  • Unemployment
  • Military deployment

Forbearance allows you to suspend payments on your student loans for a specific amount of time under certain circumstances.  While in forbearance, your loan accrues interest that if not paid will be capitalized when the forbearance ends.  When the forbearance ends, the loan will enter repayment and you will be responsible for making payments.

To determine eligibility for deferment or forbearance, please contact your student loan servicer.

Loan Consolidation. Student loan consolidation allows a borrower to combine multiple student loans into one loan. The result is a single monthly payment instead of multiple payments. Additionally, a borrower can extend their repayment time period with loan consolidation – this could lower the monthly loan payments.

For details, contact Federal Direct Consolidation at 1.800.557.7392 or visit loanconsolidation.ed.gov.

Who do I contact for help?

First and foremost, contact your student loan servicer for assistance. The following is a listing of some of the largest student loan servicers. If you are not sure if any of these servicers is servicing your account, call the lender from whom you received your loan.  If your lender does not know your loan servicer, you can find out through the National Student Loan Data System (NSLDS).  In order to use NSLDS, you must have your federal PIN. If you cannot remember your PIN, go to www.pin.ed.gov to retrieve your PIN or apply for a new PIN. The first and most important step is to reach out to your student loan servicer to work out a repayment plan for your account.

ACS (formerly AFSA) – www.acs-education.com
Customer Service: 800.835.4611
FAX for Forms: 315.738.2232
Address for Forms: PO BOx 7051, Utica, NY 13054-7051

FedLoan Servicing – www.myfedloans.org
Customer Service: 800.699.2908
FAX for Forms: 717.720.1628
Address for Forms: PO Box 69184, Harrisburg, PA 17106-9184

Department of Ed/Great Lakes – www.mygreatlakes.org
Customer Service: 800.236.4300
FAX for Forms: 800.375.5288
Address for Forms: PO Box 7860, Madison, WI 53707-7860

Department of Ed/Nelnet – www.nelnet.com
Customer Service: 888.486.4722
FAX for Forms: 402.458.2298

Department of Ed/Sallie Mae Loan Servicing Center – www.salliemae.com
Customer Service: 888.272.5543
FAX for Forms: 800.848.1949
Address for Forms: SMSC, PO Box 9500, Wilkes-Barre, PA 18773-9500

Direct Loan Program – www.myedaccount.com
Customer Service: 800.848.0979
FAX for Forms: 800.848.0984
Address for Forms: PO Box 5609, Greenville, TX 75403-5609

Forbearance and Deferment Forms

The forms below contain links to the forbearance and deferment processing forms.  To view and print these forms, you will need Adobe Acrobat Reader – click here for a free download of Adobe Acrobat Reader if you do not have it. Once you complete the form, return it to your loan servicer. Refer to the above list of servicers for mailing information.

Deferment Forms:
Economic Hardship
In School

Forbearance Forms:
Direct Loans
Department of Ed/FedLoan Servicing
Department of Ed/Great Lakes
Department of Ed/Nelnet
Department of Ed/Sallie Mae