Private Student Loan Default and Delinquency
The rules for private student loan default and delinquency are different than the rules for federal student loans. Unlike federal loans, you do not have the benefit of a nine month period if you miss payments on a private student loan. You should understand that you will be in delinquency and your loan could even 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:
- Fail to make monthly payments when due, or
- Die, or
- Break other promises in the loan Note, or
- Begin a bankruptcy proceeding, or assign assets for the benefit of creditors, or
- Provide any false written statement in applying for any Loan subject to the terms of this Note or at any time during the term of the Loan, or
- Become insolvent, or
- In the lender’s judgment, experience a significant lessening of your ability to repay the Loan, or
- Are in default on any Loan you already have with this lender, or any Loan you might have in the future.
This contract also specifies that failure to receive a monthly statement does not relieve borrowers of their responsibilities and obligations.
You should review your private loan contracts carefully to better understand what rights you have. Most private lenders will also start reporting delinquencies to credit bureaus as soon as you miss payments. Private loan servicers often make mistakes. You should check in with your servicer to make sure that the servicer applying your payments properly. The Consumer Financial Protection Bureau (CFPB) issued tips to help borrowers pay off their loans more quickly.
The collection process for private student loans is different than for federal loans. Most private lenders will write off (or charge off) your loans after 120 days, but they will keep trying to collect either on their own or through agencies they hire.