Avoiding Student Loan Delinquency and Default

By: Bryan Lee, UHEAA


Today we’re going to cover how you can avoid the nightmare that is student loan default. First off, it would be helpful for you to know what delinquency and default mean.

Keep in mind that the first day you fail to make payments on your student loan as scheduled in the promissory note—the legal document you signed when you took the loan—your loan becomes delinquent.

Depending on your student loan terms, continued delinquency can result in default.

When your loan becomes delinquent or defaults, your account may be reported to national credit agencies and this is definitely not something you want to have in your credit history.


Is missing a payment a big deal?

It is a big deal!

Don’t forget that loans are borrowed in a legal agreement that you will pay the money back. So, it’s important to stick to those legal agreement, and uphold your end.


Here are some potential negative consequences of delinquency and default:

  • You put your credit rating at risk.
  • You may lose eligibility to obtain future loans, credit cards, cell phone plans, or housing.
  • You may be asked to immediately repay the entire unpaid amount of your loan.
  • You may lose entitlements to deferments or forbearance options.
  • You may be sued for the balance of your loan.
  • Your wages may be garnished to cover the outstanding loan debt.
  • Your Social Security benefits may be withheld.

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How student loan borrowers fall into delinquency & default?

  • Some borrowers might miss their payment date due to lack of knowledge about their repayment terms.
  • Unemployment or low income can make it hard for some individuals to make their minimum payment each month.
  • Life changing events that affects one’s financial status.
  • Some borrowers even ignore their loan payments.


Strategies to avoid delinquency & default 

  1. Borrow carefully, don’t borrow more than what you need.
  2. Stick to a budget so you know you’ll have enough money each month to pay your bills.
  3. Pay close attention to your loan agreements and repayment terms and ask questions if anything isn’t clear.
  4. Understand your postponement options.
  5. Keep records of your loan documentation to help you stay on top of loan related concerns and issues.
    • Here are some documents to keep:
      • Financial aid award letters
      • Loan counseling materials (from entrance and exit counseling)
      • Your promissory note
      • Contact information for loan servicers
      • Loan disclosures
      • Payment schedules
      • Monthly payment coupons and receipts
  6. Contact your lender or servicer if you have trouble making payments.


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