Student loan debt is a significant issue for millions of Americans. Many borrowers face financial challenges, and some eventually default on their student loans. Unfortunately, this leads to confusion and misconceptions about when you default on a student loan. Misunderstandings can make the situation even more stressful, especially when borrowers don’t know what to expect or how to avoid serious consequences. In this article, we’ll explore the truth behind common myths about student loan defaults and clarify: “Which of the following is not true if you default on a student loan?”
What Happens When You Default on a Student Loan?
Before we dive into the myths, it’s essential to understand what defaulting on a student loan means. Federal student loans typically enter default after 270 days of missed payments, while private loans may default sooner. Defaulting means you’ve stopped making payments, and your loan is no longer in good standing. The immediate consequences include damage to your credit score, collection fees, and the potential garnishment of wages or tax refunds.
Borrowers in default may also lose access to future federal student aid. However, there are ways to recover from default through rehabilitation or consolidation. Now that we know what default means let’s address the myths surrounding it.
Myth #1: “The Government Will Forgive My Loan Automatically”
One common myth is that after a certain number of years, the government will automatically forgive your student loan debt. Many borrowers mistakenly believe that once they’ve made payments for a certain time or reached a particular age, the government will simply wipe away their remaining balance.
Reality: The idea that forgiveness happens automatically is false. While there are student loan forgiveness programs—such as Public Service Loan Forgiveness (PSLF) or income-driven repayment plans—these programs have strict eligibility requirements. Forgiveness is granted only if borrowers meet these requirements, and automatic forgiveness does not exist. If you’re asking, “Which of the following is not true if you default on a student loan?” this myth would be a clear example. Simply waiting for loan forgiveness will not erase your debt automatically.
During his presidency, Trump’s student loans were subject to temporary relief measures, such as forbearance and 0% interest rates. Still, these were temporary and did not alter the general rules of loan forgiveness.
Myth #2: “I Can Never Get a Job if I Default on My Loan”
Many people fear that defaulting on their student loans will make it impossible to find employment. After all, a defaulted loan can lead to a damaged credit score, and credit checks are often part of the job application process.
Reality: While it’s true that a poor credit history can affect your job prospects, especially for jobs that require financial responsibility, defaulting on a student loan does not automatically prevent you from getting hired. Employers may review your credit report, but many job positions, especially those unrelated to finance, don’t require this. Therefore, while a defaulted loan might affect your financial future and credit, it doesn’t necessarily ruin your job prospects. If you’re wondering, “Which of the following is not true if you default on a student loan?” this myth about employment is false.
Myth #3: “Defaulting on My Loan Means I’ll Go to Jail”
A frightening myth circulating in the student loan world is that defaulting on a loan will result in jail time. This misconception causes anxiety for borrowers already struggling with their finances.
Reality: You will not go to jail for defaulting on a student loan. While the consequences of defaulting are serious—such as wage garnishment, tax refund interception, and damage to your credit score—imprisonment is not one of them. No one can be jailed simply for failing to repay a student loan. If you’re asking, “Which of the following is not true if you default on a student loan?” the idea of jail time is certainly one of the myths.
Myth #4: “My Student Loan Debt Will Be Discharged in Bankruptcy”
Another prevalent myth is that student loan debt can be discharged through bankruptcy. Many borrowers hope to file for bankruptcy and erase their student loan debt, similar to how other debts can be wiped clean.
Reality: Student loans are generally not dischargeable in bankruptcy unless the borrower can prove “undue hardship.” This is a high bar to meet and typically requires the borrower to demonstrate that repaying the loan would cause significant financial distress. Most bankruptcy filings do not discharge student loan debt. If you are considering bankruptcy, be aware that student loans will likely remain part of your financial obligations unless you meet the legal requirements for discharge. In this case, the myth is false. For those wondering, “Which of the following is not true if you default on a student loan?” this myth about bankruptcy does not hold.
Myth #5: “My Defaulted Loan Won’t Affect My Family or Co-Signers”
Some borrowers believe that the consequences of defaulting on their student loan only affect them and not their family members or co-signers. They think the loan is solely their responsibility, and no one else will face repercussions.
Reality: This myth can lead to significant misunderstandings. If you have a co-signer on your loan, they are equally responsible for repaying the debt. When you default, the loan servicer can seek repayment from them, leading to financial distress for the co-signer. Additionally, the default can affect the credit score of anyone who is a co-signer on the loan. Therefore, it’s important to communicate with your co-signer and understand the full consequences of your default. So, when asking, “Which of the following is not true if you default on a student loan?” this myth about co-signers is certainly not true.
How to Avoid Defaulting on a Student Loan?
Staying proactive is the best way to avoid defaulting on your student loan. If you’re struggling to make payments, consider switching to an income-driven repayment plan or refinancing your loan. Many borrowers don’t realize that they can change their repayment plans to fit their budget, which can prevent default.
You should also stay in communication with your loan servicer. If you miss a payment, inform them immediately to avoid falling behind. Some servicers offer deferment or forbearance options to temporarily stop your payments without defaulting on your loan.
What to Do If You’ve Already Defaulted?
If you’ve already defaulted, everything is not lost. There are several options available to get back on track. You can rehabilitate your loan by agreeing to a new payment plan that brings your account back into good standing. Alternatively, you can consolidate your loan with a Direct Consolidation Loan, bringing you out of default.
It’s crucial to take action to avoid further penalties, such as wage garnishment or tax refund interceptions. Reach out to your loan servicer to discuss your options and make a plan to get back on track.
Conclusion
Defaulting on a student loan can be a stressful and challenging situation. However, many of the common myths surrounding defaults are not true. Understanding the realities of default is key to making informed decisions about your loans. As we’ve seen, misconceptions like automatic loan forgiveness, job loss, or jail time are just that—misconceptions. While defaulting on a loan can have serious consequences, there are ways to manage the situation and avoid long-term damage.
So, if you’re wondering, “Which of the following is not true if you default on a student loan?” it’s important to know that the truth often contradicts common myths. By staying informed and taking proactive steps, you can protect your financial future and make smarter choices regarding your student loans.
