Borrowers who fail to make a payment on time are considered delinquent on their Direct Consolidation Loans. Borrowers who do not make payments for 270 days are in default. Defaulting has severe and long-lasting consequences, as follows:
1) The Department of Education can immediately demand repayment of the total loan amount due.
2) The Department of Eduction will attempt to collect the debt and may charge collection costs.
3) The Department of Education reports defaulted loans to national credit bureaus, damaging borrowers’ credit ratings and, making it difficult for borrowers to make purchases such as cars or homes.
4) Borrowers with loans in default are ineligible for Title IV student aid.
5) Borrowers with loans in default are ineligible for deferments.
6) The Internal Revenue Service can withhold borrowers’ Federal income tax refunds.
Borrowers' wages may be garnished.
It is important that borrowers with Direct Consolidation Loans stay in touch with the Direct Loan Servicing Center. Default can occur when borrowers fail to keep the Direct Loan Servicing Center up to date on address and name changes, causing billing statements to go astray. In addition, the Direct Loan Servicing Center can offer alternatives when borrowers have trouble making monthly payments. Borrowers may apply for a deferment or forbearance, or change repayment plans.
(Source: loanconsolidation.ed.gov)
