Private Student Loan = Federal Student Loan in Terms of Defaulting?

[UpMyScore]

Are private student loans the same as federal student loans in terms of defaulting and the consequences that result in a default?

[gml120]

No. If you default on federal loans, the govt. comes after you with wage garnishing, bank levies, and keeping your income tax returns. Private student loans are almost exactly like credit card debt except you can't discharge it and they're usually not sold to a third party collections agency. All they can do is sue you under the laws of your state for the balance if you default and they are also bound by your state's statute of limitations. I'm pretty sure government loans will follow you until you die with no sol.

[bcohen]

If you default on federal student loans, your professional licenses can be revoked. Private student loan lenders and "guarantors" do not have the ability to do this. Also, for defaulted federal loans, your wages, bank accounts, tax returns, and even Social Security payments can be garnished without needing to sue you first.

If you default on a private student loan, the lender will usually sell the debt back to the "guarantor" organization, who will then come after you with a civil suit. You can't discharge the debt in bankruptcy, but once the judgment is obtained, you can "collection-proof" yourself in the same way that you would from a credit card judgment. That means not using bank accounts (or keeping the balances below your state's garnishment exemption) and changing jobs if your wages start to be garnished. The judgment creditor cannot garnish your tax return directly, nor garnish any government benefits, including Social Security.

Also, in some states such as Arizona, a judgment can only be renewed once, so the judgment creditor can't come after you until you die.