Consequences of Default
Default occurs when your loan is delinquent for 270 days or more, you fail to repay your loan according to the terms agreed upon in your Master Promissory Note (MPN or you faile to submit on-time requests for a deferment or cancellation. At that point, the guarantor purchases your loan and is responsible for collecting the debt on behalf of the U.S. Department of Education.
OGSLP is dedicated to helping you manage your student loan debt. We can help you develop a successful repayment plan and we offer customized loan default prevention counseling for borrowers. Contact us today at 405.234.4352 or 800.358.5460 (toll-free) or WeCanHelp@ogslp.org.
Defaulting on your student loan can result in many negative consequences, including:
- Garnishment of your paycheck. To pay your student loan debt, Administrative Wage Garnishment (AWG) allows up to 15% of your wages to be garnished without a court judgment and up to 25% of your wages wi1th a court judgment.
- Loss of federal and state tax refunds. State and federal tax refunds and other federal payments may be taken and applied to your default student loan account.
- Loss of eligibility for deferments or forbearance. Loan default disqualifies you for deferment or forbearance options from your lender. Under normal conditions, your lender may be able to lessen or suspend your payment for a short amount of time to meet your needs.
- Ineligibility for student aid. From the date of default, you're not eligible for a federal student loan, Pell Grant or Oklahoma Tuition Aid Grant until the default is satisfactorily resolved.
- Addition of attorney fees and collection costs to your loan balance. These fees can add 22% to what you already owe. Collection costs are added when no payment is made within the first 60 days of default. If you've set up payment arrangements within the first 60 days of default, collection costs will be added if you're ever 35 days past due.
- Damaged credit rating with consumer reporting agencies. After default, you have 60 days to establish satisfactory repayment arrangements with OGSLP. Failure to satisfy the balance within 60 days results in a negative report to national consumer reporting agencies, thereby seriously damaging your credit.
- Collection agency referral. Accounts are referred to external collection agencies for further collection efforts after approximately six months of non-payment.
- Transcript hold. Your school may not release your academic transcript unless your defaulted student loan is satisfied. The academic transcript is the property of the school and it's the school's responsibility to decide whether to release the transcript to you. There's no federal law which allows the guaranty agency or the U.S. Department of Education to compel the school to hold academic transcripts. OGSLP's role is only to inform schools of your current account status. You should contact your school for additional details about the release of your academic transcripts.
- Potential lawsuit. OGSLP or the federal government may bring a civil claim against you for repayment of your loan.
- Lingering debt. The debt you owe will remain due until you pay it in full. If it's not paid, guarantors, collection agencies and/or the federal government will continue to seek full payment from you.
