Success Tip Contact a Loan Counselor If you need assistance to avoid default, call Iowa Student Loan now at (800) 243-7552 to speak with a loan counselor.

Consequences of Default

Defaulting on your student loans is a serious financial situation. To default is to fail to make several regular payments on time or to fail to meet the terms and conditions of your loan.

Financial Aid Restrictions

If you default on a federal student loan, you will be ineligible for future federal financial aid. You may also be ineligible for loan forgiveness or deferment on the defaulted loans.

Credit Report Damage

Defaulting on a student loan affects your credit rating. It also means your account can be turned over to a collection agency.

Reports of default are made to all national consumer reporting agencies. Reported default information:

• May affect your ability to buy a car or house, get a credit card or get other loans in the future. Typically, the interest rate and finance charges will be much higher for loans received after you default on a loan.
• Can remain on your credit file for up to 10 years while payment history may remain on your files for seven years. If you pay a defaulted loan in full or rehabilitate your federal student loan, loan information and the payment history will remain on your credit report but the balance will be zero.

Legal Action

Once your federal student loan goes into default:

• The college or university, loan servicer, state government or federal government can take legal action to recover the money.
• The loan servicer can demand immediate payment in full.
• A lawsuit can be brought against you.
• Your guarantor can garnish your wages, which means your employer will be forced to take money out of your paycheck until your debt is paid in full.
• Your guarantor can collect any federal or state tax refunds due to you to satisfy your student loan debt. It can also collect any money you win from a state lottery, as well as any Social Security and Veterans benefits.
• Your guarantor may be able to keep you from receiving your professional license, if you're required to obtain one from your state.
• Your guarantor may sue you for repayment. If that happens, you may also be responsible for the guarantor's legal fees.
• Your guarantor may assign your defaulted loans to the federal government, which can take the same steps but at the federal level, as a last resort.