FEDERAL SCHOOL CODE: 002629
If a borrower fails to make any loan installment payments when due,
the loan becomes delinquent. The lending agency will make repeated attempts
to contact the borrower by telephone and by letter to resolve repayment
problems and prevent default.
Borrowers are in default if the loan becomes 180 days delinquent (or
if they fail to meet any other terms of the promissory note for 180 days)
and the lender concludes they do not intend to honor their obligation to
repay. Before reporting a default to a national credit bureau, the lender
gives the borrower written notice of its proposed actions, an opportunity
to enter into a repayment agreement, and an opportunity for a review of
the loan’s status.
Borrowers in default are ineligible for Student Financial Aid funds
but can take the following actions to have eligibility reinstated:
A borrower may repay the defaulted loan in full or make satisfactory repayment arrangements,
defined as six consecutive, voluntary, on time, full monthly payments that are reasonable and
affordable given the borrower’s financial situation. "On time" means within 15 days of
scheduled due date, "Voluntary" payments are those the borrower makes directly, whether or
not a judgment exists. Voluntary payments do not include these obtained
by income tax offset, garnishment, or income or asset execution.
If a borrower regains eligibility during an enrollment period, (for example,
if the sixth payment under a satisfactory repayment arrangement is made
after the start of an enrollment period), the borrower regains eligibility
for the entire academic year.
For purposes of regaining eligibility, a student may make satisfactory
repayment arrangements on a defaulted Direct loan only once. For purposes
of consolidating a defaulted loan, three payments are required instead
A borrower who makes satisfactory repayment arrangements and regains
eligibility must continue with the agreement according to the lender’s
terms. If a borrower is required to continue payment and is unable to do
so while attending school they should request a forbearance (a deferment is
not an option for a defaulted loan).