Students have been defaulting on their loans more frequently than in previous years beginning at the start of the school year in 2010. If you default on your student loan, here is what you can expect: the IRS can intercept any income tax refund you may be entitled to until your student loans are paid in full; the government can take up to 15% of a student loan debtor’s wages who is in default; up to 15% of your federal benefits such as Social Security retirement benefits and Social Security disability benefits can be taken away; and you can get sued, a move the federal government has done with increasing frequency.
- Contact the agency that is billing you.
- Explain your situation fully and honestly.
- Ask them what options are available to resolve your problem.
- Let them know that you are willing to repay your loan and ask them to work with you.
- Always stay in touch with your lender or collection agency.
There are a few repayment plans you can choose from with your lender: Standard Repayment, Graduated Repayment, Extended Repayment, and Income Contingent and Income-Sensitive Repayment. Keep in mind that you do not need to seek professional help, unless you believe the loan default is a mistake. You should never ignore default notices from your loan servicer.