What Happens if You Default on Private Student Loans


When it comes to financing your education, private student loans can be a lifeline. They can provide the funding you need to attend the college of your dreams or cover essential expenses while pursuing your degree. However, life can take unexpected turns, and financial challenges can make it difficult to repay those loans on time. In this article, we will delve into the consequences of defaulting on private student loans and explore potential solutions.

Understanding Private Student Loans

Before we explore the consequences of default, let’s establish a clear understanding of private student loans. Unlike federal student loans, which are backed by the government and come with certain benefits and protections, private student loans are issued by banks, credit unions, or online lenders. These loans typically have higher interest rates and fewer borrower protections.

The Path to Default

Missed Payments

Defaulting on a private student loan doesn’t happen overnight. It is a process that typically begins with missed payments. When you fail to make your required monthly payments, your loan becomes delinquent. Lenders usually give borrowers a grace period after a missed payment to catch up.

Delinquency vs. Default

It’s important to differentiate between delinquency and default. Delinquency occurs when you miss a payment, but the loan has not yet gone into default. Default, on the other hand, is the point at which the lender considers the loan uncollectible, and the entire balance becomes due.

Consequences of Default

Damage to Your Credit Score

One of the most significant consequences of defaulting on a private student loan is the damage to your credit score. Late payments and defaults are reported to credit bureaus, which can significantly lower your credit score. A lower credit score can impact your ability to secure future loans, credit cards, or even rent an apartment.

Legal Action

If you default on a private student loan, the lender may take legal action to recover the outstanding debt. This can include filing a lawsuit against you, obtaining a judgment, and potentially garnishing your wages or seizing assets to repay the debt.

Co-Signer Consequences

If you had a co-signer on your private student loan, they are equally responsible for the debt. A default can lead to serious financial consequences for them as well, and their credit score may also be negatively affected.

Ineligibility for Future Financial Aid

Defaulting on a private student loan may render you ineligible for federal financial aid in the future. This can significantly impact your ability to continue your education or access funding for other life expenses.

Limited Options for Loan Forgiveness

Private student loans offer limited options for loan forgiveness compared to federal loans. If you default on a federal student loan, you may have access to various forgiveness programs, but private loans typically lack these options.

Avoiding Default

Communication with Lenders

If you’re facing financial difficulties and are at risk of defaulting on your private student loan, it’s crucial to communicate with your lender. Many lenders offer forbearance or deferment options that can provide temporary relief from making payments.

Loan Rehabilitation

Another option to consider is loan rehabilitation, which allows you to make a series of on-time, agreed-upon payments to bring your loan out of default. Once the loan is rehabilitated, it may be removed from your credit report.


Defaulting on private student loans can have severe and long-lasting consequences. It can damage your credit score, lead to legal action, and affect your co-signer. However, with proactive communication and exploring options like forbearance and rehabilitation, you can work towards resolving your financial challenges and avoid the pitfalls of default.


  1. What is the difference between federal and private student loans?

    Federal student loans are backed by the government and come with benefits and protections, while private student loans are issued by private lenders and typically have higher interest rates.

  2. Can I negotiate with my private student loan lender if I’m facing financial difficulties?

    Yes, it’s a good idea to communicate with your lender if you’re having trouble making payments. They may offer options like forbearance or loan rehabilitation.

  3. How long does it take for a student loan to go into default?

    A student loan typically goes into default after a series of missed payments, but the exact timeline can vary depending on your lender and the terms of your loan.

  4. Can a defaulted private student loan be discharged in bankruptcy?

    Discharging a student loan in bankruptcy is challenging, but it’s not impossible. You would need to prove “undue hardship” in most cases.

  5. What can I do to prevent default on my private student loans?

    To prevent default, stay in touch with your lender, explore repayment options, and consider loan rehabilitation to bring your loan out of default.