Unfortunately, unlike federal student loans, defaulting on private student loans may occur after your first or just a few missed payments. Look at your loan agreement to see when your private student loan lender declares your loan to be in default. Sometimes there are other reasons for defaulting than just missing a payment.
Look at your loan agreement closely, but you may be held in default if you:
- fail to make monthly payments when due,
- break other promises in the loan Note,
- file for bankruptcy,
- make false statements to the lender when you apply for or are in repayment on your loan, or
- are default on other loans you have with the lender, even if you’re current on payments on this particular loan.
If you default on your private student loan, the lender may collect it itself, but it might also turn the debt over to a collection agency or even write off and sell your debt to a third party debt collector. You still owe the debt if it has been written-off or sold to another collection agency. To collect on a debt, the lender or collection agency may sue you. See our page on lawsuits and judgments for more information.
You have rights when dealing with debt collection agencies and lenders. For tips and guidance, see our page on problems with collection agencies.
Getting Out of Default
Getting out of default on private student loans is a much different process than for federal loans. Unlike federal government loans, private student lenders are not required by law to offer “get out of default” programs. Some lenders may have these programs, so it’s a good idea to check with your lender. If they do offer this type of program, make sure to ask what the requirements are and whether the lender will clean up your credit report after you complete the program.
Most private lenders charge off (write off) loans after 120 days of missed payments. The time period will vary depending on the lender. After the loan is charged off and in default, most private student lenders will not work with you to help you get out of default.