What happens when you default on your student loan?


It is estimated that more than one million people default on their student loans each year. Statistics show outstanding student debt in the US has tripled over the last decade. It is projected that nearly 40% of borrowers will have defaulted their student loan by 2023. The worse nightmare for any student loan borrower is not being able to make repayments as agreed. Most people only go into default if they have no other option. So, what happens when you default on your student loan? Below are things to expect.

Your previous agreement becomes null and void

When you sign up for a student loan, you are required to abide by the agreement. The loan repayment contract will only be valid if you stick by the rules. For instance, if you have agreed on a ten years repayment plan, the deal will stand if you make your payments on time as agreed. If you default, your repayment will no longer be valid. This means that the lender will pursue the remaining amount in full.

You will be reported to credit agencies

When you default on your student loan, it will get reported to credit agencies. This will hurt your credit score and your credit score will continue to dwindle as long as your student loan remains in default. Negative credit reporting will make it difficult for you to rent or own an apartment, get a car loan, get your mortgage approved, and may even jeopardize your chances of getting employed. Very few lenders will be willing to lend you money if you have been listed on credit bureaus.

You will incur collection charges

Another consequence of defaulting on a student loan is incurring substantial financial penalties. For instance, if you default on a federal student loan, collection charges, and penalties of up to 25% of the principal plus interest will apply. 

Harassment by debt collectors

When you default on your student loan, the lender will submit your name to debt collectors. Debt collecting agencies are very aggressive and will do all they can to recover the defaulted amount in full. They will call you excessively, send threatening letters, or even contact your employer or your family members and inform them about your defaulted loan.


1. https://www.cnbc.com/2018/08/13/twenty-two-percent-of-student-loan-borrowers-fall-into-default.html

2. https://www.forbes.com/sites/zackfriedman/2018/10/01/student-loans-default/#7620930ca066