Once a student loan becomes a defaulted status, the entire amount becomes due immediately. The defaulted loan status also reduces your chance of getting other financial help such as- student loan deferment and federal student loan benefits. The unpaid loans can have long time effects on your professional and personal life. Generally you ruin your chance of getting further credit package. The investors forward your defaulted student loan status to the department of education. The government will take harsh measurement against you and restrict you from receiving further monetary benefits. There are few consequences which you can face if you are in defaulted student loan status.
Tax Refund Offsets
The IRS collects any income tax refunds that you are entitled to enjoy. They suspend your income tax refunds. They continue with this process until the full payment of the entire loan is done. This is a great way to get back the defaulted loans. The department of education uses this method every year to collect the outstanding debt from the defaulted students.
Federal Benefits Withdrew
The government sizes your federal benefits if you fail to meet your deadline. If you are in defaulted student loan status then you lose federal benefits like- Social Security Retirement benefits, Social Security Disability benefits and Direct Student Loan benefits. This is a huge set back on your career. The withdrawal of federal benefits leaves a deep scar on your personal life. The reputation gets lost and the hopes of getting a good job also suffer due to your defaulted status. The elders or the co-signers for your loan feel the hardship of the debt. The relaxed and happier retirement life suddenly disappears from them.
The government can deduct 15% of your wage if you are a loan debtor. Generally the employer is served with a legal notice of 15% deduction. The employer cuts the wage and forward it to the concerning department. In addition, you cannot renew your professional license until the entire amount is paid. Sometimes, the collection cost of the retrieving agencies is also added with the actual loan amount.
Chance of getting Sued Increases
One of the dangerous consequences of defaulted loan status is that you can be sued indefinitely. There is no time limit on suing. The government fires you to collect the remaining student loan debt. Defaulted student loan is increasing every day. It is best to pay them early to avail useful benefits.