What happens if a student loan defaults?

Whether you're worried about missing a payment or have already defaulted on your student loans, the stress can be overwhelming. Defaulting on your loans means you've missed several payments, and the lender has changed your account status to "default." This loan status can have serious and long-lasting consequences.

However, there is good news. Default doesn't have to be permanent. You can take steps to get your account out of default and move forward. In this guide, learn when default occurs and how to regain control of your student loan debt.

What does it mean to default on a student loan?

To default on a student loan, you must miss several payments over a certain period. When your account enters default depends on if it's a federal or private student loan:

• Federal: With federal student loans, you're in default if you miss your loan payments for 270 days (approximately nine months) or more.
• Private: When a loan enters default varies by lender. In general, private student loans will enter default if you miss three monthly payments.

What happens when you default on a student loan?

The consequences of defaulting on student loans can be severe, but what happens varies by loan type:

Federal student loans

If you default on a federal loan, you'll face the following actions:

• Your full balance is due: Your lender will accelerate the loan, meaning you owe the full balance, along with interest and late fees, immediately.
• You lose eligibility for federal aid: If you plan on returning to school, you won't be eligible for federal loans or grants.
• Your wages may be garnished: The loan servicer can contact your employer and garnish your wages without needing a court order first.
• You could lose your tax refund and federal benefit payments: The lender can seize your tax refund and other government benefits, such as Social Security benefits, to repay your loans through treasury offset.
• You could be sued: The lender can take you to court, and you could be responsible for collection fees and court costs.
• Your credit will be affected: The lender will report the default loan status to the major credit bureaus, significantly damaging your credit. The defaulted loan remains on your credit report for seven years.
• You cannot get your transcript: Your college may withhold your official transcript and records. If you plan to apply to graduate school, the default can affect the admissions process.

Private student loans

Private student loan lenders have to take additional measures before they can garnish your wages. If you default on your private loans, you can expect the following consequences:

• Your cosigner will be held responsible: If you have a cosigner, the lender can pursue repayment from them. The defaulted loan status can also affect their credit, and they could end up in court as well.
• The lender reports the default to the credit bureaus: The lender reports the defaulted account to the major credit bureaus, negatively impacting your credit.
• The lender sends the account to collections: The lender may sell your account to a collection agency.
• The lender files a lawsuit: The lender can sue you for the outstanding loan amount. If the lender wins a judgment against you, they can get a court order for wage garnishment or even put a lien on your home.

What to do if you default on a student loan?

If your loans have entered default, one of the following options can help you get back on track:

• Federal loan rehabilitation: Federal loan borrowers may be eligible for rehabilitation. With this process, you enter into a written agreement and commit to making nine monthly payments on time within 10 months. Once you complete the payments, your account is transferred from default to current status. Currently, borrowers can only rehabilitate defaulted loans once. However, starting on July 1, 2027, borrowers will be eligible for rehabilitation twice due to President Trump's One Big Beautiful Bill Act.
• Federal loan consolidation: You can consolidate your debt with a Direct Consolidation Loan. Your loans are combined into one, and you can enter into a new repayment plan. Once the consolidation is complete, your loans are no longer in default.
• Private loan rehabilitation: Contact your loan holder to discuss your options. Depending on the company, you may be able to set up a payment plan to get out of default.

Take control of your student loan repayments

It's easier to prevent student loan default than it is to get out of default. If you're struggling to afford your student loan payments, consider these options:

• Adjust your budget: Create a budget and look for corners you can cut to make your payments more manageable.
• Contact your lender: Reach out to your lender to find out if there are any financial hardship options available, such as temporary deferments or alternative payment plans.
• Work with a credit counselor: A nonprofit credit counselor can help you track your spending, manage your money and stick to a repayment plan.

Have more questions?

Visit the Citizens Student Hub to discover key considerations for your post-college plans.