Default
Default is the failure to repay a loan. Avoiding default requires
careful planning on your part when making choices about your lifestyle
while in college and throughout your entire repayment period.
The Penalties for Default are
as follows:
Loss of eligibility for federal funds
for you to continue in school or return to school.
Notification of default is sent to credit bureaus,
damaging your credit rating and resulting in difficulty obtaining
future loans, such as for a car or home.
You may be taken to court and your assets may
be seized by the guarantee agency.
Your wages may be garnished by a collection agency,
to collect all of the charges, costs, and attorney fees incurred
by the lender.
Your federal and state income tax refunds may
be garnished and applied to your defaulted loans.
Fraud
There are severe penalties for fraud or misrepresentation
in matters pertaining to federal financial aid programs. Students
are warned by the government on the Free Application for Federal
Student Aid (FAFSA) that false or misleading information on the
application may lead to fines, imprisonment or both.
Fraud may exist in any of the
following manners:
Falsified documents or forged
signatures.
Use of fictitious names or aliases, addresses
or Social Security numbers.
A pattern of misreported information from one
year to the next.
Counterfeit Student Aid Reports (SARs).
False claim of independent status.
Stolen or fraudulently endorsed financial aid
checks.
Embezzlement of financial aid checks or funds.
Kickbacks to receive grants, loans, or employment
under the Federal Work-Study program.
Unreported prior loans or grants, and receipt
of concurrent full grants during one award year.
The penalties for fraud include
a fine of up to $20,000 and/or up to 5 years imprisonment.
