Financial Aid Step 6
Stafford Entrance Topic 6 of 6: Delinquency and Default
Notify your lender immediately if you anticipate difficulty making a payment. Failure to pay all or part of an installment payment when due can result in late charges. Your lender also has the option, in some cases, to file a lawsuit against you for failure to make timely payments.
You must start paying back your Stafford loan six months after you drop below half-time status. This six-month period is referred to as your grace period. Once you use your 6-month grace period and enter repayment, you never get it back. If you return to school and borrow again, your new loans will have a grace period but not those that entered repayment previously.
If you fail to make payments for 270 days your loan is considered to be in default. Defaulting on your student loan can result in:
- damage to your credit rating, which could impact your ability to borrow (for example, you may be denied a car loan);
- referral of your account to a collection agency;
- collection costs;
- garnishment of your wages;
- withholding of your state or federal Treasury payments (including federal tax refunds, Social Security benefits, etc.);
- civil lawsuit, including court costs and legal expenses;
- loss of deferment and forbearance entitlements and flexible repayment options;
- loss of eligibility for further financial aid; and
- suspension of your professional license.
There are three basic guidelines to follow to avoid delinquency and default:
- Inform your school and lender of changes in your name, mailing address, telephone, or Social Security number so that all correspondence is promptly directed to you.
- Read and keep all documents you receive pertaining to your student loan and be sure to understand your loan amount and the payments that will be required.
- If you’re experiencing financial hardship and are unable to make your payments, call your lender for information regarding possible temporary postponement or reduction of payments through a deferment or forbearance.
Step 1 - Stafford Entrance Topic 1 of 6: Applying for a Federal Stafford Loan
Step 2 - Stafford Entrance Topic 2 of 6: Loan Types
Step 3 - Stafford Entrance Topic 3 of 6: Understanding Student Loan Borrowing
Step 4 - Stafford Entrance Topic 4 of 6: Repayment of Your Student Loan
Step 5 - Stafford Entrance Topic 5 of 6: Solutions for Loan Repayment Problems
Step 6 - Stafford Entrance Topic 6 of 6: Delinquency and Default
Step 7 - Review what you’ve read and take the Financial Aid Entrance Quiz