The default and delinquency system for private loans is much different than for federal student loans. Most important, you do not have the luxury of a nine month period if you miss payments on a private student loan. You should understand that your loans will usually go into default as soon as you miss a payment. The default period will be described in the loan contract. See section K of this private loan contract. In this contract, you are in default if you:
This contract also specifies that failure to receive a monthly statement does not relieve borrowers of their responsibilities and obligations. This is just a sample. You should review your private loan contracts carefully to better understand what rights you have. There may be additional default triggers in your loan agreement. The CFPB issued a consumer advisory in April 2014 warning borrowers of provisions that may lead to default even if the borrower is current on payments. The danger is that a co-signer’s death or bankruptcy will trigger a default for all borrowers on the loan. One way to deal with this ahead of time is to ask your lender about releasing your co-signer from the account.
Once you are in default, the collection process for private student loans is different than for federal loans. There is a time limit on private student loan collections and private student loan holders have fewer collection tools than the government has to collect federal student loans. Lawsuits are the main collection tools that private student lenders have.