Perkins Loan Default

Generally speaking, no one signs a promissory note for a Perkins Loan with a plan to default on that loan. But, it does sometimes happen. Read this article to learn more about what default is, how it is handled and what you can do to fix a default situation.

Default is defined as failure to repay a loan according to the terms agreed to when you signed a promissory note. Perkins Loan Default is quite specific; it occurs if you fail to make a payment for 270 days if you repay monthly (or 330 days if your payments are due less frequently).

The consequences of default are severe and can be long term.

  • Your school may take action to recover the money, including notifying national credit bureaus of your default. This affects your credit rating for a long time.
  • The school can turn the loan over to the federal government for collection.
  • The Internal Revenue Service can withhold your U.S. individual income tax refund and apply it to the amount you owe
  • Your employer might be asked to deduct payments from your paycheck., i.e., garnish your check
  • You may have to pay for expenses that your school totes up while trying to collect money from you.
  • If you return to school, you’re not entitled to receive additional federal student aid.
  • Legal action also might be taken against you.

What if you don’t think you are in default, but the school does? If you think you have made payments that are not reflected in your loan account, you should send copies of the payment method (i.e. checks, money orders) to the school to prove your case.

If you have become incarcerated and as a result, have been unable to make the loan payments, an “Incarceration Verification” form should be completed by the Warden or other appropriate official of the institution where you are incarcerated and returned to the school who holds your Perkins loan.

Here are three arguments that don’t work when you find yourself in default.

  1. They never billed me. The school has no obligation to bill you; you still have an obligation to pay.
  2. I was a minor when I signed the promissory note. Sorry- the Department of Education says you are still legally bound by the decision.
  3. The school breached its contract by providing with a poor education. Sorry again.

Follow these steps to avoid a Perkins Loan default.

  1. Plan your finances carefully; this is a serious responsibility.
  2. Communicate with your school as soon as you believe that you may experience difficulty paying. Most schools are very eager to help their students find a way to meet their financial obligation.
  3. Seek a forbearance or deferment, if you qualify.

If you do end up in a Perkins Loan default, read our article on Perkins Loan Rehabilitation to get good advice on how to reverse the default.