Consequences of Defaulting On A Loan
After a loan has been in default for 270 days (meaning no payment has been made) and the loan agency is unable to collect the loan, the loan is turned over to the state’s guarantor. The loan may become “accelerated,” meaning the entire balance will be due in a single payment. The following steps may be taken in order to collect the loan. The United States Department of the Treasury may offset federal and/or state tax refunds. The Department may also require an employer to garnish 15% of disposable employee pay to be put toward repayment of the loan. Additional collection costs may be assessed. Legal action may be taken against the defaulted borrower. And finally, the credit bureau may be notified, resulting in a damaged credit rating.
Read more about this topic: Voluntary Flexible Agreement
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