Posts Tagged: ‘Federal Family Education Loan Program’

What Actually Happens When You Default on Your Student Loans

March 31, 2017 Posted by kingcade

According to the Department of Education, eight million Americans defaulted on their federal student loans last year. Approximately 1.1 million of those former students did so for the first time which is a U.S. high.

The former student loan ombudsman at the Consumer Financial Protection Bureau, Rohit Chopra, told Time Magaizine, “In spite of a booming stock market and falling unemployment, there is obviously a significant block of the labor force that is really struggling.” He went on to say, “New college graduates and new entrants to the workforce are facing a double whammy of flat or declining wages and higher debt.”

Defaulting on student loans is a growing problem for millions of borrowers. As a result, it is important to understand the consequences of doing so. Here are three things you need to know about defaulting on a student loan:

  1. It is more serious than a late payment. In most cases, default occurs when a borrower has not made a payment in 270 days, which is roughly nine months. However, loans that are offered by the Federal Family Education Loan Program (FFEL) are considered to be in default after 330 days or 11 months. When this happens, the entire balance of the loan and interest is due immediately and you lose any eligibility for deferment or forbearance, or any additional financial aid.
  2. Your credit score will drop. The federal government will report your student loan delinquency to credit agencies. If this happens, it will be a long and difficult process to rebuild.
  3. The federal government may garnish your wages. If you default on a federal student loan, the government may take money out of your paycheck before you even see it. Your tax refund can also be held to collect some of your debt. If the debt persists for long enough, the government can also take money out of your social security check. Fortune reported that more than $1 billion has been taken from social security checks since 2001.


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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at