Consequences of Defaulting on a Federal Perkins Loan

The Perkins Loan program is one of several U.S. government-backed student loan initiatives, this one targeting needy students for post-secondary education. As with any loan, the borrower is expected to pay the loan back. If you don't pay the Perkins Loan back, you will be in default and possibly be subject to collections, court judgment and wage garnishments. The following will help you understand what happens when a Perkins Loan goes into default and what your options are.

Default Defined


Your federal Perkins Loan will be administered by one of 1,800 qualifying posts-secondary schools, such as a university or trade school. Your school is your advocate because they do not want you in default.  Your default can affect the amount of federal student aid they can offer in the future.

If your loan is payable in monthly installments, you are considered in default after 270 days of monthly non-payment, 330 days for more-than-monthly installments. For the typical monthly loan, you have nine months to get back on track if you fall behind. This means you can get current in payments or make arrangements with the lender for deferred payments or loan cancellation.

Government Options

If you are in default on a Perkins Loan, the government has a variety of options to begin getting its money. It can:

    * Garnish your wages
    * Withhold income tax refunds
    * Notify credit bureaus
    * Take legal action
    * Turn your name over to a collection agency

Effects on You

If your Perkins Loan default is unaddressed, you will not be eligible for any other federal student loans. You will not be able to defer payment on any other government-backed loan. You could be prevented from renewing certain professional licenses. And you will not be able to enlist in the military.

Additionally, your credit rating will be affected.  Your reduced credit score will adversely affect your ability to borrow or to get a new job.

The student loan provider may also file a court judgment against you, compelling repayment directly from the courts.

Costs of Default


You will be liable for costs of the default, in addition to the full amount of the loan plus interest.

Fixing the Problem

The best way to fix a Perkins Loan default is to avoid it.

    * Plan before leaving school how you will budget for repaying the loan.
    * Take full advantage of the grace period after you complete school to begin repayment.
    * Talk to your lender sooner rather than later if you appear headed for trouble.
    * If you fall behind, there are deferment options available.

Finally, you can get your Perkins Loan cancelled by working in certain careers under specific circumstances. Career options include teaching, nursing, law enforcement and military service. Economic hardship and unemployment are not considered sufficient reasons for loan cancellation. However, your loan payments can be deferred based on economic hardship. But you will not be a candidate for deferment if you are in default. So, again, it pays to act early.

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