As noted in an earlier post, student loan defaults are becoming alarmingly common. Of course,there is not much you can do if you do not have the funds to repay your student loans on time. Still, it’s important to know the grave consequences of defaulting on student loans. Unlike other types of debt, you cannot technically declare bankruptcy. In other words, your student loans will follow you until the day you pay them off, or until you die. Before you think of resorting to defaulting on your loans, consider what’ll happen. If you end up defaulting on your loans:
1. Your tax refund check will be taken away indefinitely
One thing that many of us look forward to once a year is when the IRS gives us back some of our hard-earned money in the form of a tax refund. Whether you use this refund for a vacation, the down payment on a car, or for something else entirely, if you default on your loans, you can say bye to the extra yearly bonus forever.
2. The government can garnish your wages.
Not only can the government take away their little annual present, they can stick their hands into your paycheck, without even telling you. Technically called “wage garnishment,” taking away money that you worked hard is yet another dire consequence of student loan default.
3. The Department of Education may sue you.
If you’ve defaulted on your loans, Uncle Sam will not only take away your money, he’ll come looking for more. Although this does not necessarily happen with everyone who defaults on their student loans, the Department of Education can technically sue you for essentially any asset that you own. They can place a lien on your home, meaning you won’t be able to sell your house.
4. You’ll lose any professional license that you studied so hard to acquire.
If you went to school to pursue a career in a profession that requires a license, like medicine or law, you’ll have your license revoked such that you’ll be instantly fired from your job and you won’t be able to find work anywhere else.