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Defaulted Student Loans 101

Are you a college graduate with defaulted student loans? Our debt counselors want you to know that you’re far from alone. More than 1 million people default on their loans. That debt is now up to $1.5 trillion. By 2030, the Federal Reserve reports that nearly 40% of borrowers will default on their student loans. This is a growing crisis and one that deserves discussion. ACCC will go over why loans default, what problems they cause, and how to fix them. Let’s get started!

ACCC has the details on defaulted student loans.

ACCC has the details on defaulted student loans.

Defaulted Student Loans FAQ

Why Do Loans Default?

Defaulted student loans are loans that go 270 days or more without full payment. This is beyond delinquency, which only requires one missed full payment. Much like credit card delinquency, this is reported to the credit bureaus and hurts your credit score. Your loans, after nine months, will usually go to a collection agency.

What Problems Do Defaulted Student Loans Cause?

Previously, we said missed student loan payments cause hits on your credit score, much like missed credit card payments. Also like credit cards, missing student loan payments have a plethora of other issues. They include garnished wages, withheld tax refunds and benefits, emotional stress, and court orders. Furthermore, unlike credit card loans, auto loans, and mortgages, you can’t declare bankruptcy on your student loans.

How to Fix Defaulted Student Loans?

At this point, what can be done to fix a bad student loan? First, you can pay as much towards the loan as you can. Since you can’t declare bankruptcy on them, you will have to pay one way or another. There are programs that would allow you to pay a certain amount each month, and get the loan back in good standing. These “rehab” programs would start back at square one should one payment be missed. Another option is just paying the loan off in full. It’s difficult if your economic situation hasn’t improved, but it’s doable. Start by budgeting to cover your major expenses and needs first, then see what you have leftover for the month. Whatever extra money you have, put that towards your loans, if you aren’t saving it.


Student loans cause trouble once they are in default. There are multiple problems that come from it. It’s important to pay them on time, all the time. If you do fall behind, don’t despair. It’s never too late to turn your situation around; if you got into debt, you can get out of it too!

If you are looking for student loan services, speak with a certified counselor at ACCC today. Schedule a free credit counseling session.



Andi is a Marketing Assistant at ACCC. He is passionate about supporting financial literacy efforts and helping to educate people on the Talking Cents blog!

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