For a Federal Perkins, Institutional, and/or Nursing Loan, default occurs if you don't make an installment payment when due or don't comply with the promissory note's other terms.

What happens if I default?

The consequences of default are:

  • The entire loan balance (principal and interest) may be immediately due and payable.
  • You will lose your deferment options.
  • You will not be eligible for additional federal student aid.
  • Your account might be turned over to a collection agency. If so, you will have to pay additional interest charges, late fees, collection costs, and possibly court costs and attorney fees.
  • Your account will be reported to national credit bureaus, and your credit rating may be damaged. You might find it difficult to receive other types of credit, such as credit cards, car loans, or mortgages. Because many landlords do credit checks, it might be hard to rent an apartment. Some employers check your credit rating, so bad credit could affect getting a job. Your default will remain on your credit report for up to seven years.
  • Your federal income tax refunds (and in some states, your state income tax refunds) might be withheld and applied toward your loan repayment.
  • Your employer, at the request of the loan holder, may garnish part of your wages.
  • You might be unable to obtain a professional license in some states.

Contact your lender or servicer as soon as you think you might have trouble making payments. Talk to your lender or servicer and discuss all options for making payment easier.