Introduction Paying For and Selecting a College Federal Loans, Private Loans, and How to Tell the Difference Repayment Plans Student Loan Servicers and Ombudsman Offices If You Can't Repay Your Loan Loan Consolidation Programs Loan Cancellation/Forgiveness Programs If Your Loan Defaults Collection Activities Additional Information and Assistance Glossary Index of Resources
Once a loan is in default, you may be asked to immediately pay the unpaid principal balance and interest. Your debt may be referred to a collection agency and collection costs will be added to your loan.
For federal student loans, collection activity can occur without a court judgment. You may be subject to a variety of collection efforts, including:
- Your wages can be subject to administrative wage garnishment unless you make a request for a hearing in writing, postmarked no later than 30 days from the date the garnishment notice was sent, and provide an explanation that 1) the debt is unenforceable, 2) that you would suffer financial hardship, or 3) you’ve been employed for less than 12 months after having been involuntarily separated from employment;
- Your state or federal tax refunds or property tax refunds may be withheld;
- The federal government may offset or deduct from certain federal benefits, including Social Security benefits; and
- You may be denied future requests for federal financial aid.
If your student loan is a non-federal loan, your loan may go into default much sooner than federal loans. Your private loan may also go into default for other incidents as described in the loan contract, such as if you or your cosigner die, file for bankruptcy, or break other promises in the loan.
If a debt collector gets involved in collecting your student loans, it will generally add to your loan costs and can be expensive. It is best if you can work with your loan servicer to prevent your loan from being placed in default.
If your debt is referred to a collection agency, know your rights. Review this Office’s Debt Collection Fact Sheet and The Credit Handbook for more information on your rights when dealing with debt collection agencies.
The U.S. Department of Education has hired over 20 debt collection agencies to assist it in collecting on student loan debt. If a debt collection agency working for the federal government behaves improperly, you should let the U.S. Department of Education know:
United States Department of Education
400 Maryland Avenue SW
Washington, DC 20202
The Minnesota Department of Commerce is a state agency that licenses and has authority to regulate debt collectors operating in Minnesota. If a debt collection agency behaves improperly, you should file a report with the Department of Commerce as follows:
Minnesota Department of Commerce
85 7th Place East, Suite 280
St. Paul, MN 55101
(651) 539-1600 (local)
(800) 657-3602 (Greater MN only)