Default
Default occurs when a borrower's payments to their lender become more than 270 days delinquent. After the 270 days the lender files a claim with the guarantee agency for reimbursement of the borrower's outstanding loan balance. Per federal regulations, the lender must document the servicing of the loan(s) by the lender. Once the guarantee agency determines the loan has been correctly serviced, they will purchase the loan(s) from the lender. Most federal student loans issued through Prescott College have been guaranteed by EDFUND.
What Are the Consequences If I Default? The consequences are serious and long term:
Loans may be assigned to a collection agency.
A defaulted loan is reported as a collection account to national credit bureaus.
The borrower may experience credit problems.
Problems may occur with securing collateral, cure periods, foreclosures and mortgage insurance denial.
Right to deferment is lost.
Eligibility for further financial aid is stopped until the loan(s) is paid in full or is in repayment and the borrower has met all requirements for additional financial aid.
The borrower's school may withhold academic transcripts.
State and federal tax refunds may be "offset" (withheld) to repay the defaulted student loan(s).
