One of the biggest questions I receive as a debt relief attorney, is what happens if you default on a student loan?   First, it depends if you have private student loans or federal student loans.  But the bottom line is, you definitely do have options to get student loans out of default, as you can see from my client debt relief success stories


What Happens if You Default on a Student Loan

If you default on your student loans, you are not alone.  The U.S. Department of Education released a report in September that the defaulted student loan rate is up to 11%.  Your federal student loan is considered in default if you have not made a payment in 270 days.  Technically, your private student loan debt is considered in default when you have missed your first payment, but it is “charged off’ after not paying for 180 days.  Private student loans operate much like credit card debt when in default.

When you default on a student loan, whomever you owe will come after you to collect the debt and they most likely file a lawsuit against you.   Usually the lender you originally took out the loan with has handed your loan over to another entity to collect the debt. The federal government often turns their debt collection over to entities such as Educational Credit Management Corporation (ECMC), Great Lakes, Phoenix Financial, Navient, and Performant Recovery.  If you default on your federal student loans, you can have our wages garnished.  If you defaulted on student loans that you took out from a private lender, such as Sallie Mae, Navient, National Collegiate Student Loan Trust, then they will use their vast debt collection resources and teams of attorneys to sue you to collect the debt.  If you ignore the lawsuit, then there is a high chance you will face a default judgment resulting in student loan default wage garnishment or bank levy.


Defaulted on a Student Loan? What You Should Do

what happens if you default on a student loan
What happens when you default on a student loan? If you’ve defaulted on a student loan you need to take action immediately.

What to do if you default on your student loan is to take immediate action by contacting a debt relief attorney who will offer you free advice on the best path to move forward based on your particular student loans debt.  Never pay anyone up front for advice!  I often have clients who have a mix of federal and private student loans.  If you have defaulted on private student loans, then I usually recommend a debt settlement.  A debt settlement is a negotiation between the lender and the borrower that the borrower will pay back a (usually greatly reduced) portion of the total debt owed over a period of time or in a lump sum.  Lenders often agree to a debt settlement so they can avoid the costly fees of collecting the debt and taking you to court.

For instance, our client had originally taken out a private student loan from Sallie Mae for over $60,000.  The loan was turned over to Navient.  The loan payments were way too high and my client defaulted on a student loan.  Navient turned her loan over to Central Credit collection agency.  I was able to negotiate a debt settlement for the debt and was able to convince them to accept $22,000 instead of the full $60,000.  That was a savings of over $32,000 or 65% of the balance due.

What happens if you default on federal student loans is quite different.  To avoid a student loan wage garnishment, your best option it to get into a student loan forgiveness program.  Again, I would recommend finding a federal student loan debt lawyer who offers a free consultation to go over which program is right for you.  Federal student loan options include student loan rehabilitation plans, forbearances and deferments, as well as income-based repayment plans.

For example, I have a client who had approximately $94,000 in federal and private student loans.  Not being able to afford to pay on both, we got her into an income-based repayment plan on her federal student loans for just $25 per month for the next 12 months.  She will need to reapply for the program after 12 months, but in the meantime – she is now able to afford her private student loan payments.   Getting into a loan rehabilitation is a great way to get out of student loan default, as long as you stay on track with your income-based repayment plan.


Help with Defaulted Student Loans

Now that you know what happens when you default on a student loan and what to do about it, you could try to handle it on your own if you have done thorough research.  Keep in mind the federal government and these giant debt collection agencies have entire departments dedicated to collecting student loan debt.  Proper counseling and representation can wind up saving you thousands of dollars and a lot of stress.  If you have already gone into default on your student loans, then beware of those making money off the student loan debt crisis.   Debt relief companies often take advantage of borrowers who are already in vulnerable situations.  Be sure you consult with a debt attorney, as attorneys are held to ethical standards under the law that debt relief companies are not.  Legally student loan lawyers have to put the best interest of their clients first.

If you need student loan default help, give me a call at 858-217-5051 or email me at  I offer a 100% free consultation to go over your debt problems and get you on the road to a life free of debt.


debt relief lawyer in san diego california

Daniel R. Gamez, an attorney focusing exclusively in debt relief, is licensed to practice in all state and federal courts in California and Texas. Mr. Gamez owns and operates the Gamez Law Firm in San Diego and Los Angeles, California. For more information, please contact Daniel Gamez at 858-217-5051, or use our online contact form. Stay updated about the latest debt relief tips by following on Facebook and Twitter and read about client success stories on our website.