If you don’t make your student loan payments, there can be serious consequences that impact your borrowing rights, your credit score, and ultimately your ability to pay off your student loan. But what exactly happens when you can’t pay?
Delinquency. When your student loan is delinquent, it means that you’ve missed at least one payment and your loan is in danger of going into default (discussed below). Think of delinquency as “pre-default.” Delinquency periods (the length of time before your loan goes into default) vary depending on your student loan. For federal student loans, you can be delinquent for up to 270 days (approx. 9 months) before you go into default. For private student loans, your delinquency period is usually far shorter, sometimes as short as 30 days. While your loan is delinquent, your lender or servicer may report the delinquency to credit reporting agencies, which could harm your credit.
You can cure the delinquency by either making your required past-due payment, or by exploring deferments and forbearances. It is very important to come up with a game plan before your loan goes into default. Tip: if you’re worried about becoming delinquent because you have trouble keeping track of all your student loan payments, you may want to explore auto-debit.
Default. Strictly speaking, default occurs when a borrower has broken the terms of the loan contract by failing to adhere to repayment obligations. Defaulted student loans are far more serious than delinquent ones. While you can cure delinquency relatively easily by making your payments or going into deferment/forbearance, once you’re in default, it may be difficult to get out.