Student Loans: What Happens If You Default
Student Loans: What Happens If You Default
Student Loans: What Happens If You Default

Walking away from college without student loans is pretty hard to do. There are ways of getting scholarships and grants but for the majority student loans are the way to go. With that said there is always the fear of defaulting. Not saying you aren’t mature enough to handle those loans but sometimes … life gets in the way.

Life such as:

  • Not getting that dream job
  • Getting a job that doesn’t pay nearly enough
  • Rent/mortgage
  • Family


And just like if you were to default on a car loan and lose your car, the consequences of defaulting on your loans can create issues you carry throughout your working life.

The Federal Reserve reports that 11% of  the 43 million borrowers — or 4.7 million Americans — are in default, and that a shocking 37% have missed at least one payment. Many are unaware of the costs and penalties of defaulting on their loans, as illustrated by the fact that 34% of those in default owe less than $5,000.

These consequences can include:

  • Your parents can be liable. For most 18 year olds getting a loan isn’t easy, and your parents just might cosign with you. Just like you they have the hope that after college you will get a good job and be able to pay that back responsibly. But if you don’t then they are stuck holding that bill which can affect their personal credit and other loans they may already have or might want/need to get in the future.
  • Your credit score will suffer. Not only will your parents have issues with their credit but so will you. Loan servicers report all delinquencies of at least 90 days to the three major credit bureaus.
  • The monthly payment option can be lost. Don’t pay and they could take that away and start asking for the entire amount upfront. Not sure but I am guessing that not too many people just have $41,000 laying around to pay the bank.
  • Interest accrues over time. On top of what you already owe the interest grows which increases the amount of payments and the payments themselves.
  • Tax refunds could be seized. The government will get their money back one way or another, and depending on how much tax money you get back they can start taking the payments for your loans from that.

This isn’t said to scare you, but to get you thinking about how you handle your money. Make sure to spend that student loan money properly and save while in school. It isn’t always easy but it is worth it if you take the time to make a plan to pay those loans back, make them a top priority along with rent and food.

Make sure to visit for steps to avoid defaulting on your student loan.

Share this information with anyone you think might need the help to get on track with their student loans and leave any comments or questions below for me!

About Meka

Hi my name is Meka, the Penny Smart Girl®. I'm an accountant, certified Quick Books ProAdvisor and a Personal Finance Expert (aka Money Coach). I love calculators, balancing budgets, and helping demystify money woes. I bring calm to my client’s chaos. I make unknowns, known. Just me, you, and a calculator or two.

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