Important Terms

Default
Default occurs when you fail to make your monthly payments for six months or more. When you default, the guarantee agency purchases your loan and initiates collection activity against you until the loan has been repaid.

Credit Bureau
An organization that maintains information on your credit history. Financial institutions and sometimes prospective employers and landlords obtain credit bureau reports for information about your financial reputation. A negative credit rating adversely affects your ability to borrow or obtain credit.

What happens if I don't make my payments?

Defaulting on your student loan is a serious matter. It affects your credit rating and can cause you numerous problems for many years to come. For example, some employers will check your credit history before hiring you. A default can prevent you from a getting loan to buy a car or a house. If you default you are restricted from borrowing under any student loan program or receiving additional federal financial aid.

In the event of default your guarantee agency purchases the loan from your lender and begins collection activity against you. This activity may include (but is not limited to):

• Reporting your default to a credit bureau.
• Reporting your default to the Internal Revenue Service, causing your federal tax refunds to be withheld and applied toward your loan balance. Many states also withhold state income tax refunds.
• Garnishing your wages.
• Contacting your loan's endorser (if any) for payment in full.
• Continued contact with you until your account is paid in full.

If you are having difficulty making your payments, contact your lender or guarantee agency immediately. Many problems can be resolved and there may be options available to you if you communicate with your lender or guarantee agency.

The Northwest Educational Loan Association can be contacted at:

Consolidation Managing Your Money

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Index of Common Terms