Sense & Centsibility Blog
What you need to know about defaulted student loans
Student loan default rates are the rise. According to a study done by the Federal Reserve Bank of New York, of the 37 million borrowers who have outstanding student loan balances, 14.4% have at least one past due student loan account (as of third quarter, 2011). That’s about 5.4 million borrowers! Nearly one in 10 borrowers who started repayment in 2009 defaulted within two years – and that’s just for those starting repayment in 2009. Defaulting on your student loans can have massively negative consequences: the federal government has powers to recapture your tax refunds, garnish your income without taking you to court, and can even garnish certain amounts and types of Social Security income. Not to mention there is no time limit on how long they can try to collect on your defaulted loans. Collectors for defaulted private student loans do not have the same collection powers, but defaulting on both types of loans will have a negative impact on your credit and make it nearly impossible to borrow for a house or car for many years to come. Regardless of your situation or student loan status, don’t wait - it’s better to take action now.