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Sweeney Law, PA Fort Lauderdale Business Lawyer
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What Happens When You Are in Default on Your Federal Student Loan

Student loan defaults are rising at alarming rates. Pursuant to a recent report by the Department of Education, the number of borrowers who defaulted on their student loans increased seventeen percent (17%) from 2015 to 2016. In 2016, about 42.4 million Americans owed around $1.3 trillion in federal student loan debt. Generally, a borrower is considered to be in default if payment has not been made in 270 days. The increase in defaults is occurring despite healthy real estate and stock markets, as well as decreasing unemployment rates.

Borrowers are rarely aware of the severe negative consequences that can occur if they default on their federal student loans. So what really happens when a borrower defaults on their federal student loans?

W-2 Wage Garnishment

If a borrower is a W-2 wage earner, then the government can garnish wages with a 30 day warning. What is so scary about this for borrowers is that the government does not have to initiate a lawsuit in order to garnish wages. If a borrower determines that their wages are being garnished it is imperative that they seek counsel immediately to protect their rights in the garnishment proceedings.

Federal Tax Refund Garnishment

If a borrower has defaulted on their federal student loan then the federal government can use the return amount to pay down the principal and interest on federal student loans in default. Borrowers anticipate receiving a refund that are in default on their student loans should consider retaining an attorney to determine if there are any viable means to retain the tax refund.

Social Security Garnishment

If a borrower does not work, but collects social security benefits, then the federal government can garnish these monies. What is so troublesome about this procedure is that oftentimes borrowers that are on social security are living off of fixed income and finances are very tight. A lot of borrowers in this situation can qualify for an income-driven-repayment (IDR) plan. In an IDR borrowers pay a percentage of their discretionary income toward their student loan each month. If a borrower’s discretionary income level is below a certain level the borrower will not be required to submit any payments until they start earning more income.


The last option for collecting federal student loans is to sue the borrower. This scenario often times occurs with self-employed individuals that are not W-2 wage earners and do not receive any social security benefits. Borrowers that receive service of process of lawsuits need to seek counsel immediately in order to prevent the entry of a default. If a default judgment is entered against the borrower it can oftentimes be difficult and/or impossible to vacate.

Negative Impact on Credit Report

A missed payment on a student loan can have a detrimental impact on a borrower’s credit report. For example, a first missed payment can decrease a borrower’s credit score of up to approximately 100 points. Continuing missed payments that lead to a default under the student loan can have serious cumulative effects on a borrower’s credit score.

Sweeney Law, P.A. Regularly Represents Consumers with Student Loan Issues

Brendan A. Sweeney, Esq., of Sweeney Law, P.A., The Debt Warrior, regularly represents consumers that have issues with their student loans, including counseling and litigation. If you have student loan issues then please contact Sweeney Law, P.A. at (954) 440-3993,,, immediately to protect your rights.

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