Defaulting on a loan happens when repayments are not made for a certain period of time as defined in the loan's terms of agreement, typically apromissory note. For federal student loans, default requires non-payment for a period of 270 days. For private student loans, default generally occurs after 120 days of non-payment.[1]
In 2021, outstanding student loan debt has reached a record more than $1.8 trillion.[2]
 | This sectionrelies largely or entirely upon asingle source. Relevant discussion may be found on thetalk page. Please helpimprove this article by introducingcitations to additional sources at this section.(August 2024) (Learn how and when to remove this message) |
According to analysis of borrowers from the 2003-2004 academic year over a twelve-year period, defaulters generally tend to be older, lower income, and more financially independent than those who did not default. Borrowers typically owe $9,625, which is $8,500 less than the median loan balance of a non-defaulter. The majority of defaulters did not complete their bachelor's degree, but the median completed at least one year of study while maintaining grades in the C+/B- range. This shows that defaulters are able to complete college level work. Furthermore, most borrowers do not immediately enter default - the median borrower takes 33 months to enter default on their federal loans. Generally, a little more than half of all defaulters are able to rehabilitate their debt.[3]
There are a number of paths to resolving student debt default, including: