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What if You Default?

You should try to avoid defaulting on your student loans. A default will negatively impact your credit score and your ability to obtain credit in the future. But if you are unable to avoid default, you may have options to help repair your credit and get you back on track. You can consider contacting your servicer to discuss your options and ask them to work with you toward a sensible solution.

While each person's particular situation is different, below you will find some general information regarding default and your post-default options:

Photo of two students studying back-to-back

Default – Federal Student Loans

Most federal student loans go into default after nine months (270 days) of non-payment. You may face the following consequences if you default on your federal education loans:

You have rights under New York State and federal law when dealing with debt collectors. Contact DFS if you believe that a debt collector has violated the law.

Federal Loan Payment Plans (Post-Default)

You have the following general options once you default on your federal student loans:

Default – Private Student Loans

Many private student loans go into default after four months of non-payment (120 days), but the specific terms of default vary by loan contract.

There are no uniform refinancing options for distressed borrowers of private student loans. If you have trouble making payments on your private loan, you need to contact your loan servicer or check with your private loan contract to determine your options.

Loan Forgiveness and Public Service

If you work in public service, you may be able to have part of your federal student loan debt forgiven. Qualifying public-interest jobs include government service, military service, law enforcement, public health, and certain teaching positions.

Public service loan forgiveness is not automatic. You must apply for loan forgiveness once you have made 120 qualifying payments.

To qualify you must:

Perkins and FFEL loans are not eligible for public service loan forgiveness. However, you can consolidate these loans into a Direct Consolidation Loan to take advantage of public service loan forgiveness. Payments made prior to consolidation do not count toward the 120 qualifying payments.

Tip: Any amount forgiven under the public service loan forgiveness program is NOT taxable as income.

See StudentAid.gov for more details on whether you qualify for public service loan forgiveness.

Statute of Limitations - Federal Student Loans

Federal student loan debt is not subject to a statute of limitations. This means that there is no time limit for attempting to collect a federal student loan by:

But you may be able to cancel your federal student loans in limited circumstances.

Student Loans and Bankruptcy

You may have heard that you cannot discharge your student loans, even in bankruptcy. This is NOT correct. You can discharge your federal and private student loans in bankruptcy if you are able to demonstrate in court that paying your loans would cause you and your dependents “undue hardship.” The court will consider your financial circumstances in determining whether paying your student loans would cause an undue hardship. Filing for bankruptcy is a very personal decision and can have a significant, long-term impact on your finances. If you are thinking seriously about filing, you should consult a lawyer.

To learn more about discharging student loans in bankruptcy, visit StudentAid.gov.

Federal Loan Cancellation

You can cancel your federal student loans in limited circumstances. Cancellation options vary depending on the type of loans you have.

Some common cancellation programs are based on:

For more information on the terms and conditions of available federal student loan cancellation programs, visit Studentaid.gov.

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