Student loan debt is one of the most significant problems affecting the lives of Americans in the modern era. The most recent statistics indicate that national cohort default rate was 7.3% for the fiscal year 2018, which the United States Department of Education released. You might be tempted to disregard your financial obligations, but doing so is a terrible plan that will lead to severe repercussions.

The repercussions of defaulting on a student loan are, for the most part, identical to those of failing to pay off a credit card balance; however, there is one significant way in which it may be far worse.

The federal government guarantees the vast majority of student loans, and the federal government has capabilities that debt collectors can only fantasize about having. Even while it won't likely be as terrifying as having armed marshals at your house, the situation might be quite uncomfortable. This is what ends up taking place.

First, You're Considered Delinquent

When your payment on a loan is more than 90 days past due, the payment is considered late. This information is sent to the three most significant credit bureaus. Your credit rating will suffer as a result of this action.

This implies that new credit applications might be turned down or granted only at the higher interest rates offered to borrowers who pose a greater risk. A poor credit rating might have repercussions in other areas of your life. Potential employers often check candidates' credit scores, and these ratings may be used to gauge one's character.

Also, the companies who supply mobile phone service do, and they cannot provide you with the service contract that you desire. Customers deemed poor creditworthiness often must make a security deposit before receiving utility services. A potential landlord may turn down your application.

The Account Is in Default

Your account is considered to default after the payment has been overdue for 270 days. A collection agency will be contacted about your account if the financial institution you owe money submits it to them. The organization will make every effort to pay payment from you, except for any activities that FDCPA bans). Debt collectors may tack on additional fees to pay the expense of actually collecting the money owed to them.

The federal government may only become involved for several years, but it'll bring a significant amount of authority with them whenever it does. It can take your tax return and put it against your debt balance. It can garnish your paycheck, which means that it will communicate with your employer to make arrangements for a part of your income to be paid directly to the government.

Why You Want To Avoid Student Loan Default

When you default, it indicates that you violated your contract, and collection activities might commence. If you default on federal student loans, you could face various serious repercussions, such as having your wages garnished, having your tax refunds withheld, having your Social Security payments garnished, incurring additional late fees, continually accruing unpaid interest, and incurring collection costs.

Before a private lender may garnish your earnings, it must file a lawsuit against you and get a court decision in its favor. Private lenders can't garnish tax returns and checks received from Social Security. A negative mark on your credit history for seven years from the date it was first recorded might be considered further collateral damage caused by defaulting on a loan.

What To Do If You're Having Payment Trouble

Make sure you do everything you can to avoid skipping any payments. If you have federal student loans, you should talk to your loan servicer about reducing your payments or pausing them altogether. This might involve the following:

• Participating in an income-driven repayment plan, which bases your monthly payments on a percentage of your income (or even nothing if you are currently jobless).
• Claim a postponement of your unemployment benefits.
• You may put a stop to loan loans by applying for a forbearance.

The Absolute Worst Scenario

A guy with armed U.S. marshals in his doorway was, in the truest sense facing the worst-case situation possible. After taking out the loan, he failed to return the money he borrowed about 30 years ago. In the end, the government filed a lawsuit. According to the United States Marshals Service, many efforts were made to serve him with a court order, but none were successful. In 2012, when he was called and asked to appear in court, he declined to do so.

That year, a judge became concerned about his failure to appear in court and issued a warrant for his arrest. He told CNN that when the marshals eventually approached him outside his house, he ran inside to grab his rifle because he didn't recognize the men standing in front of him.