Understanding Default on a Student Loan: Causes, Consequences, and Solutions

Defaulting on a student loan means failing to meet the agreed-upon payment terms. When a borrower misses payments for an extended period, usually 270 days, the loan is considered in default. This has significant repercussions for both the borrower and the lender. Default can severely impact a borrower's credit score, leading to higher interest rates on future loans and potential legal actions such as wage garnishment. Consequences of default include the loss of eligibility for deferment, forbearance, and federal student aid. Additionally, the borrower might face collection fees and the loan balance could be accelerated, demanding immediate full repayment. Prevention and Solutions involve understanding the terms of the loan, maintaining communication with the lender, and exploring options such as income-driven repayment plans and loan rehabilitation. Borrowers should proactively seek advice from financial counselors to avoid the pitfalls of default.