Immediate Consequences

Negative Credit Bureau Reporting

• Federal regulations require that OSAC report information like the original default amount and current balance of each of your defaulted loans to all national credit bureaus.
• Even though your loan may be paid in full (PIF), defaulted student loans continue to show on your credit report for seven years from the time your default is originally reported.
• OSAC reports to the following credit bureaus.

Collection Costs

• You agreed to pay your loan back to the lender when you signed your promissory note and that if you defaulted on this agreement, you would pay collection fees and costs.
• Collection costs of up to 25% of the outstanding principal and interest may be added to the balance of your loan.
• To avoid or reduce collection charges, you are encouraged to payoff or make a large payment on your account within the first 60 days of default.

Future Financial Aid Revoked

You are no longer eligible for Federal Student Financial Aid (Title IV aid) (e.g. grants, loans) when you default on your student loan.

Deferment Eligibility Revoked

When you default on your student loan, you lose eligibility for authorized deferments (e.g. education, unemployment, military, Peace Corps, VISTA).

Transcripts and Academic Records

If you are in default on your student loan, your school may withhold your transcript or other academic records.

The following may also occur if you default on your student loan(s).

Administrative Wage Garnishment (AWG)

• Up to 10% of your disposable income can be garnished by OSAC to recover your student loan debt. If you are in default on loans with other guarantors they may also garnish your wages.
• Money is deducted directly from your regular paychecks, without your consent, and sent to OSAC to be applied to your defaulted loans.
• By law, you have certain rights when you are facing AWG, including the right to:
  • inspect and copy records related to your debt.
  • establish a repayment plan to prevent wage garnishment.
  • request a hearing.
• Your employer may not fire you, refuse to employ you or discipline you because your wages are garnished.
• Payments withheld under AWG are not considered voluntary and do not qualify for consideration of reinstatement of Federal Student Financial Aid (Title IV aid) eligibility, rehabilitation or consolidation.

Collection Agency Referral

If your account qualifies, OSAC may refer your debt to a collection agency. If your account has been referred to one of the listed vendors, you will need to contact that agency for repayment arrangements.

Professional License Revocation

You may be prevented from obtaining or renewing any occupational license or certificate that you possess or are required to possess in the State of Oregon.

State Tax Offset Program

Your State Tax Refund may be offset and applied to your defaulted loan. Offset is the process of applying your tax refunds to your student loan(s) rather than paying them to you. This is not a voluntary action.

Treasury Offset Program

Treasury offset is the process of applying to your student loan(s) any federal payment for which you may be eligible rather than paying them to you. This is not a voluntary action.

• Federal regulations require that any federal payments for which you are eligible, such as income tax refunds, be applied directly to your debt instead of being sent to you.
• If your offset is withheld, these payments will not be considered voluntary even though they will be deducted from your balance. In addition, this offset does not count toward any program that requires voluntary payments such as reinstatement of Federal Student Financial Aid (Title IV aid) eligibility, rehabilitation or consolidation.

Judgment Filing

If you are taken to court and a Default Judgment is filed against you, your interest rate will increase. In addition, your loan will no longer be eligible for the Rehabilitation or Consolidation programs.

Regain Eligibility

Before you can regain eligibility for additional grants, scholarships or loan funds, you must establish repayment and make six consecutive, on-time, full, voluntary monthly payments to each holder of a defaulted loan. To continue your eligibility, you must remain current through the repayment of your loan. If you do not remain current, your eligibility for financial aid will be revoked and you will not be able to regain eligibility until your defaulted loans are paid in full.