A federal student loan goes into delinquency the day after the due date for which a payment has been missed. After 270 days of missed payments (or 330 days for loans with payments less frequently than monthly), a federal loan will be considered to be in ‘default’. Nine months is generally longer than the ‘charge off’ which occurs after failing to make payments on other kinds of debt, including private loans and credit cards, after just a few months.
Once delinquent, your lender or servicer must provide you with information about the Federal Student Aid (FSA) Ombudsman. From 1 to 15 days delinquent, your lender (or servicer) must send you at least a letter advising you that the loan is delinquent and the letter must suggest that you make a payment on the account to remedy the situation. If you are having difficulty repaying your federal loans and/or you haven’t made a payment in 60 days, then special disclosures will be sent to you.
After 15 days (but within 180 days), your lender should provide you with four more attempts to contact you by phone and mail. Of these efforts to contact you, one must be made before the 90 day mark and another afterwards. There are other requirements for these letters that must be sent, including that they must state, list or describe available options like deferment, income based repayment, loan forgiveness and the like. Also, two of these letters must describe how the loan can be assigned to a guaranty agency for extra-judicial collection efforts (tax refund offset, wage garnishment, etc.) and that reporting to the major credit reporting bureaus will also take place. You can prevent these actions by making a payment on or before the 180th day past due.
After 180 days, your lender must send a letter describing options and/or ways to prevent default as well as a description of how to prevent default. At 241 days past due (or afterwards), your lender must send you notification as a final demand for payment. This letter gives you 30 days (from the date of the letter) to pull the loan out of default. During the 270 day period, no absence of collection activity will likely occur for more than 45 days. If you are incarcerated for 10 years or more, your loans will probably be written off. With these facts in mind, doesn’t it make sense to try to obtain forgiveness on your federal student loans?