Understanding Default 

Atlantic Cape Graduate ThinkingIf you don’t make your loan payments, you risk going into default. Defaulting on your loan has serious consequences. Your school, the financial institution that made or owns your loan, your loan guarantor, and the federal government all can take action to recover the money you owe. Understand how missing a loan payment can be a problem, what default means and the consequences of default, and what you need to do if your loan is in default or if you think the default on your loan is an error.  After reading this information, you may want to review Avoiding Default* or Getting Out of Default

What is “default”? 

“To default” means you did not make your payments on your student loan as scheduled according to the terms of your promissory note, the binding legal document you signed at the time you took out your loan. To learn what may happen if you default, what steps you can take to keep your loan from going into default, and what your options are for getting out of default, go to StudentAid.gov/end-default*

Did You Know?

You are responsible for staying in touch with your loan servicer and making your payments, even if you do not receive a bill. If you don’t, you may end up in default, which has serious consequences

Who is my Student Loan Servicer?

The Loan Servicer is used by the Loan Holder to assist with managing the repayment of the loans that they hold. The loan servicer collects loan payments, responds to your questions about your loan account, and performs other administrative tasks for the loan lender. Your loan servicer may be the same as your loan holder, or it may be a company that woks on behalf of the loan holder. Why pay for help with your federal student loans when your loan servicer will help you for FREE? If you need help identifying your federal student loans, check your loan Servicer* at StudentAid.gov. StudentAid.gov will not include information about any private student loans you may have received 

What are my options out of default?

You have several options for getting your loan out of default. These include:

Repayment in full*,  

Loan rehabilitation*, and 

Loan consolidation*.  

How to Manage Your Student Loans*

This guide does not provide information about repayment of the following types of loans:  PLUS loans made to parents; private education loans (made by a bank or other financial institution under that organization’s own lending program, not the FFEL Program); school loans (not Perkins Loans); or loans made through a state loan program.

For information about repayment of private student loans, contact the organization that made the loan. For repayment information about PLUS loans made to parents, contact your loan servicer. For a list of servicers, see StudentAid.gov/servicer

Disclaimer: * Some of the Web addresses in this publication are for sites created and maintained by organizations other than Atlantic Cape Community College. They are provided for the reader’s convenience. Atlantic Cape does not control or guarantee the accuracy, relevance, timeliness, or completeness of this outside information. Further, the inclusion of particular Web addresses is not intended to reflect their importance, nor is it intended to endorse any views expressed or products or services offered on these outside sites, or the organizations sponsoring the sites.