To default means to fail to make payments on a student loan as scheduled or fail to file deferment/cancellation requests on time according to the terms of the promissory note.
Once a borrower defaults on his/her Federal Perkins Loan, the following can happen:
- Holds will be placed on University records that will prevent future registration, release of transcripts and diplomas.
- The loan balance will be accelerated and become due in full.
- The default status of the loan will be reported to the national credit bureaus. A negative credit rating may make it difficult to borrow money in the future.
- The borrower will lose the right to forbearance, deferment and cancellation benefits.
- The borrower will lose the right to receive additional Federal Student Financial Aid.
- The loan will be assigned to a professional collection agency and all costs involved with the collection of the loan will be assessed to the borrower. Collection costs can be up to 40% of the loan balance placed with the agency. Continued delinquency may result in legal action and the borrower will be responsible for legal fees related to litigation of the debt.
Loan Rehabilitation
If a borrower has defaulted on his/her Federal Perkins Loan, he/she may rehabilitate the loan by requesting and making nine (9) on-time, monthly payments, as determined by the University or our collection agency.
A borrower may rehabilitate a defaulted Federal Perkins Loan only once.
Benefits of successful loan rehabilitation:
- The borrower will qualify for the benefits and responsibilities of the original promissory note.
- The default will be removed from his/her credit history.
- The borrower will have a maximum of nine (9) years to repay the remaining balance in full.