What happens when you forfeit on student loans?

What happens when you forfeit on student loans?

The Consequences of Defaulting on Student Loans: What You Need to Know

Defaulting on a student loan can have serious and long-lasting repercussions. It’s important to know what may happen if you’re unable to keep up with your payments. Not all student loans are the same, so it’s important to understand what the consequences of defaulting on your particular loan are.

Financial Impact

Defaulting can have a negative financial impact, including:

  • Your loan balance may increase due to late fees, collection costs, and interest.
  • Your loan may be sent to a collection agency, which may require you to pay additional fees.
  • Your credit score may suffer, which can make it difficult to qualify for a loan, mortgage, or credit card in the future.
  • Your wages may be garnished. Your employer may be required to deduct a portion of your paycheck and send it to the loan servicer.
  • Your tax refund may be taken. The government may withhold your tax refund and use it to pay off your student loan.

Non-Financial Impact

Defaulting on your student loan can also have other, non-financial repercussions. These include:

  • You may be ineligible for further financial aid. Your loan servicer may report your default to the National Student Loan Data System (NSLDS), which could make you ineligible for additional federal grants or loans.
  • Your professional license may be revoked or suspended. If you’re in a profession that requires a license, such as nursing or law, defaulting on your student loan may cause your license to be revoked or suspended.
  • You could be sued. Your loan servicer may take you to court in order to recover the money you owe.

Getting Out Of Default

If you’ve defaulted on your student loan, there are ways to get out of default. These include:

  • Repayment in full. Paying the full amount of the loan, including any late fees or collection costs, will restore your loan to good standing.
  • Loan rehabilitation. This is an agreement between you and your loan servicer that involves you making nine on-time, consecutive monthly payments. Once you successfully complete the terms of the rehabilitation agreement, your loan will be considered current.
  • Loan consolidation. This involves combining one or more loans into a new loan. This may reduce your interest rate, reduce your monthly payments, and help you get out of default.

Defaulting on a student loan can have serious consequences, both financial and non-financial. It’s important to understand the consequences of default and the steps you can take to get back in good standing. If you’re having trouble making payments, contact your loan servicer as soon as possible to discuss your options.

How to Avoid the Financial Pitfalls of a Student Loan Forfeiture

When you take out a student loan, you are agreeing to pay it back with interest. However, if you do not pay back your loan on time and in full, you are at risk of forfeiting your loan and facing serious financial repercussions. It is important to understand what forfeiting on a student loan means and how to avoid it.

What Happens When You Forfeit on Student Loans?

When you forfeit on a student loan, your loan is considered to be in default and you are no longer eligible for any type of repayment assistance. The lender will also report the default to the credit bureaus, which will have a negative effect on your credit score. Furthermore, you will be subject to collection fees, late fees, and additional costs imposed by the lender. In some cases, you may also be subject to wage garnishment or legal action in order to recover the loan money.

How to Avoid Defaulting on Your Student Loan

The best way to avoid defaulting on your student loan is to stay on top of your payments. If you find yourself struggling to make your payments, there are several options available, such as deferment, forbearance, and loan consolidation. Additionally, you may be eligible for loan forgiveness programs, such as the Public Service Loan Forgiveness Program or the Income-Based Repayment Plan.

Additionally, it is important to stay in contact with your lender and be transparent about your financial situation. Many lenders are willing to work with borrowers who are having difficulty making payments and may be able to offer flexible repayment options. In some cases, you may also be able to negotiate a lower interest rate or a reduced balance.


Forfeiting on a student loan can have serious financial repercussions. To avoid defaulting on your student loan, it is important to stay on top of your payments and be aware of the options available to you. Additionally, it is important to stay in contact with your lender and be transparent about your financial situation. By taking these steps, you can avoid the financial pitfalls of a student loan forfeiture.

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