Falling behind on federal student loans can lead to other major financial problems

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Defaulting on federal student loans can trigger other major financial consequences for borrowers, including a lower credit score and wage garnishment.

, there could be a "historically large increase in the amount of federal student loan delinquency and defaults as a result of the Covid-19 pandemic."The Pew survey found that many borrowers aren't aware of specific consequences of defaulting on their federal student loan debt. A third or less of respondents knew, for example, about the possibility of collection fees or wage garnishment prior to falling behind.

"The consequences of default are not just punitive but also intended to recover the funds for the federal government," said higher education expert Mark Kantrowitz. In addition to the financial setbacks, respondents reported "a high emotional toll" connected to experiencing the consequences of default "with themes of sadness, depression and anger."

 

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