Which of the Following is Not True If You Default on a Student Loan?
Student loan default is a topic no one really wants to discuss, but it’s something many students face, whether it’s due to financial hardship, lack of understanding about repayment plans, or just poor money management. If you’ve found yourself wondering, which of the following is not true if you default on a student loan?—trust me, you’re not alone. I’ve been there, and understanding what actually happens when you default on a student loan can be the first step in avoiding it—or at least managing it more effectively.
When I was paying off my student loans, I had so many questions about default. What happens if I miss a payment? What are the consequences of defaulting? And, honestly, there were a lot of myths that made me more anxious than I needed to be. So, let’s clear things up and dive into the facts about student loan default.
What Happens When You Default on a Student Loan?
Before we explore the details of which of the following is not true if you default on a student loan, it’s important to understand what “default” means. Simply put, student loan default happens when you fail to make your payments on time for an extended period—usually 270 days (around nine months).
I remember when I started struggling with payments, and the idea of defaulting kept me up at night. It felt like a never-ending cycle of stress, and that made it hard to focus on finding solutions. I didn’t know what would happen if I missed a payment or, even worse, if I defaulted. That’s why knowing the truth about default is critical—it can help you avoid unnecessary panic and make informed decisions.
Defaulting on a Student Loan: What’s at Stake?
Now that we know what default is, let’s talk about what’s at stake. The consequences of defaulting on a student loan are pretty serious. In fact, they can follow you for a long time, and sometimes even impact your future. So, which of the following is not true if you default on a student loan? Let’s break it down by addressing common misconceptions.
Your Credit Will Be Ruined
This one is true. When you default on a student loan, your credit score can drop significantly. I’ve seen this firsthand. My own credit score took a hit when I fell behind on payments. Lenders look at your credit score to gauge your reliability, and defaulting on a loan shows that you aren’t meeting your financial obligations.
Once your loan goes into default, it can stay on your credit report for up to seven years. This means you could face difficulties when applying for mortgages, car loans, or even renting an apartment. My advice: keep your credit in mind when handling student loans. If you can, avoid default at all costs. The damage to your credit is real and long-lasting.
Your Tax Refunds and Wages Can Be Garnished
Here’s another reality of student loan default: your tax refunds and wages can be garnished. This means the government can take money from your paycheck or tax refund to repay your loan. I was lucky enough to avoid this situation, but I know people who have had their wages garnished, and it’s not a fun experience. It can be a huge financial burden, especially if you’re already struggling.
Wage garnishment is a serious consequence of defaulting, and it can last for years. If you fall into default, you might find that the government starts taking a portion of your paycheck—sometimes up to 15%—until the loan is paid off. I’ve learned that if you can’t make your payments, the government has the right to collect the money in this way.
You Can’t Rehabilitate Your Loan Once It’s in Default
False! One of the most important things I learned through my own experience is that you can rehabilitate your student loan after default. Many people mistakenly believe that once they default, they’re stuck with that debt for life. That’s just not true. There are ways to get back on track, and it’s worth looking into.
For example, you can enter into a loan rehabilitation program, where you agree to make a series of reduced payments (usually for nine months). After successfully completing the program, your loan can be removed from default. This was a game-changer for me, and I was able to improve my financial standing and repair my credit over time. Loan rehabilitation is a lifeline, so don’t assume you’re stuck with a defaulted loan forever.
You Could Lose Eligibility for Federal Student Aid
This is true, and it’s a big one. When you default on a federal student loan, you lose eligibility for most types of federal student aid, including grants, work-study, and new loans. This is something that affected me directly. During my default period, I couldn’t access new loans or grants, which made it more difficult to further my education or pursue professional development.
If you plan to go back to school or pursue another degree, defaulting on a student loan can significantly impact your options. It’s important to keep this in mind when managing your student loans, especially if you think you might want to return to school later on.
Your Loan May Be Sold to a Private Debt Collector
This is also true. Once your loan defaults, it may be handed over to a private collection agency, and those agencies often charge hefty fees. In my case, I received multiple calls from debt collectors after I missed payments. They can be persistent, and it’s not an easy experience.
Private debt collectors are aggressive, and they will do whatever it takes to recover the loan amount. This includes adding collection fees and possibly even suing you for the debt. This is why staying on top of your loan payments is so crucial.
What Can You Do to Avoid Default?
Now that we’ve gone over which of the following is not true if you default on a student loan, it’s important to discuss how to avoid default in the first place. Let me share a few tips that worked for me during my repayment journey.
Look Into Income-Driven Repayment Plans
One of the best ways to avoid default is by enrolling in an income-driven repayment plan. These plans adjust your monthly payment based on your income, making it easier to afford your student loan payments. I’ve used an income-driven repayment plan myself, and it helped me avoid default during difficult financial times. It’s worth checking out the options available to you.
Stay in Communication with Your Loan Servicer
If you’re struggling with payments, don’t ignore your loan servicer. Trust me, I’ve been there, and the worst thing you can do is let your loans go unnoticed. If you’re having trouble, talk to your servicer about deferring or forbearance options. They might be able to offer a temporary solution until you’re back on your feet.
Consider Loan Consolidation
Loan consolidation is another option to avoid default. By consolidating your federal loans into a single loan, you may be able to reduce your monthly payments. I consolidated my loans when I was struggling to make multiple payments, and it helped simplify my finances. If you have federal student loans, consolidation might be worth considering.
Conclusion
In the end, defaulting on a student loan is a serious matter that can have long-term consequences on your financial future. However, which of the following is not true if you default on a student loan is a question that many people get wrong. The truth is, default is not the end of the road, and there are ways to recover, rehabilitate, and rebuild your credit and financial health. Understanding the facts about default is crucial for making informed decisions about your student loans.
By staying proactive and utilizing the options available to you, you can avoid default or get back on track quickly if you fall behind. If I learned anything through my own student loan journey, it’s that default isn’t the end—it’s just a setback that can be overcome with the right approach.