Loan Delinquency and Default


Overview

There are steps you can take to avoid default and to rectify a delinquency.

An important part of borrowing student loans, or any debt, is to understand the terms and conditions of the loan that you are borrowing. If a payment is late or is not made, you will become delinquent. After an extended period of delinquency, your loan will go into default. Both default and delinquency can have serious repercussions and effects on your credit.

Delinquent:
When a payment is not received by the due date. The loan remains delinquent until payments are made.
Default:
When payments have been missed for an extended period of time. Federal student loans will go into default when payments have been missed for 270 days (9 months).

If you become delinquent or go into default, contact your loan servicer immediately to discuss your options to correct the situation. You may qualify for a different repayment plan, a deferment, forbearance or consolidation. In some cases of delinquency, it may be an issue of just making the missed payment.

Steps to avoid delinquency and default

  1. Understand your borrowing
    1. Know the type of loan you are borrowing including the fees and interest associated with the loan.
    2. Read the promissory note (MPN). The promissory note is a legally binding document. By signing the MPN, you are agreeing to repay the loan according to the terms in the MPN. All loans received must be repaid even if you do not graduate or find a job in your field of study.
  2. Manage your borrowing
    1. Create a budget every year to determine how much you really need to borrow
    2. Do not accept your loans until you know you need them
    3. Reduce the amount you wish to borrow
    4. Inquire about monthly payment plan options with the university
    5. Contact the Student Loan Education Office to discuss concerns you have about borrowing
  3. Track your loans
    1. Determine your loan servicer
    2. Set-up an account with your loan servicer to track your loans
    3. Keep records of your loans that include:
      1. Correspondences from servicers
      2. Principle amount
      3. Interest rate
      4. Servicer contact information
      5. Requests for payment plan changes, deferments or forbearances
      6. Documentation submitted to your loan servicer
      7. Other pertinent loan information
  4. Stay in touch with your loan servicer
    1. Contact your loan servicer when any of the following occur:
      1. Your demographic information changes
      2. You graduate, transfer, withdraw or drop below half-time enrollment
      3. You need help making your monthly payments