What will happen if I can’t pay back my Federal student loan?

Defaulting on Federal student loans

You knew the time would come when you had to pay back your student loans, and now that time is here. Rather than paying various rates and payments on a variety of student loans, you decided to consolidate. This is generally a wise move, but you still have to make that monthly payment.

What happens when circumstances prevent that from happening? Maybe you’re having trouble finding work, paying your other bills or you’ve suddenly found yourself in an emergency that swallowed up a lot of your funds.

If you suddenly find yourself in default, the U.S. Department of Education’s Default Resolution Group might be able to help. However, they can only help if you have a Federal Family Education Loan (FFEL), which includes Federal Stafford, Federal Consolidation and Federal PLUS loans.

One very real scenario for people in default of federal student loans is wage garnishing. You might also find your federal income tax return is withheld and you could lose your eligibility for other student loans. The best thing to do is to try and get out of default or avoid it altogether.

Communicate with your lender as soon as you realize you’re not going to be able to make a payment. They just might be able to offer you another payment plan.