Default and Repayment

What is Loan Default?

Loan default is failure to repay a loan according to terms of the Master Promissory Note. There can be serious legal consequences for student loan defaulters. There are different options to prevent falling into default status.

The following are some options:

Deferment = a postponement of payment on a loan that is allowed under certain conditions and during which interest does not accrue for subsidized loans. This request can be made if you are returning to school and are enrolled in at least half-time status. Please contact your loan servicer for more information.

Forbearance = a period during which your monthly loan payments are temporarily suspended or reduced. You may qualify for forbearance if you are willing but not able to make loan payments due to certain types of financial hardships.
A complete list of Direct Loan forbearances and their eligibility criteria can be reviewed at www.dlservicer.ed.gov.

Repayment Plan = Changing repayment plans is a good way to manage your loan debt when your financial circumstances change. For example, you can usually lower your monthly payment by changing to another repayment plan with a longer term to repay the loan. There are no penalties for changing repayment plans.

Click here to learn more about available payment plans.

What if I default on my Loan?

If you default, it means you failed to make payments on your student loan according to the terms of your promissory note, the binding legal document you signed at the time you took out your loan. In other words, you failed to make your loan payments as scheduled. Your school, the financial institution that made or owns your loan, your loan guarantor, and the federal government all can take action to recover the money you owe.

Consequences of Default

National credit bureaus can be notified of your default, which will harm your credit rating, making it hard to buy a car or a house.

You will be ineligible for additional federal student aid if you decide to return to school. Loan payments can be deducted from your paycheck.

State and federal income tax refunds can be withheld and applied toward the amount you owe.

You will have to pay late fees and collection costs on top of what you already owe. You can be sued.

How do I get Help with my loan problems?

If you are having a problem with your federal student loan, contact the FSA Ombudsman at the US Department of Education. The FSA Ombudsman is dedicated to helping students resolve disputes and other problems with federal student loans.

The FSA Ombudsman will research your problem in an impartial and objective manner and will try to develop a fair solution. The FSA Ombudsman does not have the authority to impose a solution. Nevertheless, many students have found the FSA Ombudsman to be helpful in resolving disputes with lenders.

You can contact the FSA Ombudsman by phone at 1-877-557-2575 FREE, by fax at 1-202-275-0549, by mail at U.S. Department of Education, FSA Ombudsman, 830 First Street, NE, Fourth Floor, Washington, DC 20202-5144, by visiting fsahelp.ed.gov or by e-mail at fsaombudsmanoffice@ed.gov.

For more information and to learn what actions to take if you default on your loans see the Department of Education’s Default Resolution Group Web site.

Soka University of America is Here to Help!

Soka University of America is committed to helping you be successful while in school and after you have graduated or withdrawn. You are always welcome to visit, email and call for assistance should you need assistance or guidance in loan repayment options.

More Financial Literacy Resources

  • www.nslds.ed.gov/nslds_SA - NSLDS is a helpful resource in federal student loan management, as it allows students to view a summary of all of their federal student loans, as well as the contact information for the holder(s) and servicer(s) of their loans.
  • www.studentloans.gov – Provides information on loan entrance and exit counseling, financial awareness and student loan repayment.
  • Repayment Estimator via studentloans.gov
  • www.annualcreditreport.com - Students should request a free annual credit report. This will allow you to pull your credit report from all three credit reporting bureaus.
  • www.MyMoney.gov - This is the U.S. government's website dedicated to teaching all Americans the basics about financial literacy.