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What happens if I default on a private student loan?

If you’re unable to make your private student loan payments, the lender can report your default to consumer reporting agencies, which could harm your credit. They may take different actions to collect the debt.

Private student loans often go into default when you miss monthly payments. Depending on the terms of your loan, you can also default on a private student loan if you declare bankruptcy or default on another loan.

Private lenders may attempt to collect on your debt directly, or they may hire collection agencies to try to collect on your debt. In addition, they may take you to court within the statute of limitations. A statute of limitations legally sets the maximum amount of time when a lawsuit can be filed upon default of your student loan. The statute of limitations for private student loans varies from state to state.

After the statute of limitations has expired, the private lender is no longer legally allowed to sue you to collect the debt.

You should review your private loan contracts carefully to better understand what rights you have if you are worried about going into default. If you have not received a letter from your servicer and you believe you may be in default, you should consider contacting your servicer immediately to discuss repayment options and determine if it is possible for you to avoid default.