Hardship Caused by Unreasonable Payment Requirement

When a Federal student loan goes into default, or a grant overpayment is identified, the party to whom that debt is owed can demand that the debt be paid in full immediately, and the Department, school, or guaranty agency that holds the debt you owe has the legal right to demand that repayment in full immediately, and to take enforcement action to collect the full amount if not paid in full.

The debtor is then responsible for satisfying that demand from his or her own funds or assets, from funds borrowed from third parties or from Federally-financed loan programs, or agreeing to repay the debt on installment terms that are satisfactory to the Department, school, or guaranty agency that holds the debt. A debtor who claims that he or she cannot afford to repay a particular installment amount bears the burden of proving that the amount exceeds what he or she can afford based on his or her total financial circumstances, and that some lesser installment amount can be repaid. To do so, the debtor must provide a complete statement showing the income and expenses of the debtor and his or her household members. If your debt is owed to the Department, you can download this Statement of Financial Status now. You should also understand that any payments you make voluntarily while you are negotiating a payment arrangement would both reduce the amount you owe and will demonstrate that you are acting in good faith.