With many young graduates carrying anywhere from thousands to hundreds of thousands of dollars in student loan debt, students are currently facing a mountain of a financial challenge. On top of already high numbers, student loan debt is a sticky kind of debt, as in it stays with the borrower or cosigner no matter what.
There's no declaring bankruptcy should you find yourself in over your head. There's no ignoring bills if you can't make the payments. There's no getting rid of it.
But what about when you simply can't make payments on your loan? Beyond a late payment fee, continuing to let your student loan bills stack up will eventually lead to larger repercussions. Namely, student loan default. There are a variety of actions you can take when you can't afford to make payments, but if none of those options work for you, defaulting can have major repercussions.
Borrowers can default on a loan for any number of reasons. Some borrowers default because they're financially unable to make payments. Others default unknowingly on a debt they didn't know that they carried. But one thing remains true among all these possibilities: If payments aren't received by your lender, your student loan will default. What exactly does that mean? Let's take a look.
Defaulting on Your Student Loan Debt
First, lets take a look at the timeline when you're late on your payments.
- As soon as you miss your first student loan payment, you're considered delinquent. This status can act a bit like a red flag to both you and the lender.
- After a payment reaches 90 days past due the delinquent status will be reported to the three major credit bureaus and a mark negative mark will be added to your credit report.
- After 270 days past due, a student loan is considered to be in default. At this point, your debt will be put into collections and payment will be required from collections agencies.