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Federal Perkins Loan Default

Default is defined as failure to repay a loan according to the terms agreed to when you signed a promissory note. If you are on a monthly repayment schedule, Perkins Loan default occurs when you fail to make a payment for 270 days. If your payments are due less frequently, Perkins Loan default occurs when you fail to make a payment 330 days.

The consequences of default are severe and can be long term.

  • Your school may take action to recover the money, including notifying national credit bureaus of your default. This affects your credit rating for a long time.
  • The school can turn the loan over to the federal government for collection.
  • The Internal Revenue Service can withhold your U.S. individual income tax refund and apply it to the amount you owe.
  • Your employer might be asked to deduct payments from your paycheck., i.e., garnish your wages.
  • You may have to pay for expenses that your school incurs up while trying to collect money from you.
  • If you return to school, you’re not entitled to receive additional federal student aid.
  • Legal action also might be taken against you.

Follow these steps to avoid a Perkins Loan default:

  • Plan your finances carefully; this is a serious responsibility.
  • Communicate with your school as soon as you believe that you may experience difficulty paying. Most schools are very eager to help their students find a way to meet their financial obligation.
  • Seek a forbearance or deferment, if you qualify.

Reversing a Perkins Loan Default

If you do end up in a Perkins Loan default, review our page on Perkins Loan Rehabilitation to get good advice on how to reverse the default.