Loan Default - What Happens When You Can't Pay
Quality reviewed September 2026
- Grades
- Grades 9-12
- Time
- About two 50-minute class periods
- Includes
- 11 ready-to-teach files
- Format
- Word (.docx) · PowerPoint (.pptx)
- Slide deck
- Guided notes
- Guided notes teacher key
- Activity + answer key
- Quiz + answer key
- Exit ticket + answer key
- Teacher guide
- Teacher presentation notes
What students do
- Trace the default timeline from a missed payment through collections and wage garnishment
- Read a line chart tracking a credit score drop across each missed-payment milestone
- Calculate a wage garnishment amount under the federal 25% disposable-pay cap
- Identify the options a borrower has before default and explain how each one helps
What it covers
- The difference between delinquency and default, and why delinquency comes first
- What a charge-off actually means, and why the debt is still owed afterward
- How collections and a court judgment lead to wage garnishment
- Deferment, hardship plans, and refinancing as ways to stop the slide early
Learning targets
- Define delinquency, default, collections, and wage garnishment
- Trace the default timeline from a missed payment through charge-off, collections, and wage garnishment
- Read a line chart that tracks how a credit score drops across the missed-payment milestones
- Identify the options a borrower has BEFORE default and explain how each one helps
Peek inside
Life happens to everyone
Job loss, medical bills, or cut hours can make a payment impossible
Devon paid a $9,000 car loan ($300/month) on time until a job loss
A missed payment is common and survivable; it is not the end of the road
One missed payment starts a clock
Life Happens to Everyone
A job loss, a medical bill, or a cut in hours can make a loan payment .
Devon borrowed $ for a car at $300 a month and paid on time at first, then a job loss made the payment impossible.
One Missed Payment Starts a Clock
The day after a payment is due and unpaid, you are LATE, also called .
The lender starts counting the days past due: 30, 60, 90, + days.
1. Q1. When Devon misses a payment and the lender reports the account as 30, then 60, then 90 days past due, the account is in a state of .
Why this matters
A 720 credit score doesn't fall in one drop. It falls in specific steps: a missed payment, a charge-off, a collections call, then a wage garnishment capped by federal law at 25% of disposable pay. Students trace Devon Carter's own score through each stage instead of hearing default described as one bad thing that just happens.
The step that surprises students most is the last one, not the first. Most assume a missed payment locks in the outcome, so I linger on deferment, a hardship plan, and refinancing, any of which can stop the slide. Nearly every stage on that timeline stayed fixable until someone stopped answering the phone.
From one teacher to another
By the third slide the room always goes quiet, the credit score line falling step by step down Devon Carter's timeline, and nobody expected a lost job to end in wage garnishment this fast. Students trace his 720 score through the missed payment, the charge-off, and the collections call, then calculate his garnishment themselves under the federal 25% cap. The moment I care about most is the last slide, because it's still reversible, almost every step of it, if you call the lender early.
Every file in this toolkit
-
Activity (Student)
Devon Carter's 720 credit score falls step by step on a line chart once the $300 monthly payment on his $9,000 car loan stops, and students order a seven-stage timeline before calculating what wage garnishment takes from his pay.
-
Activity (Answer Key)
A 720 credit score falls to 505 across Devon's default timeline, an 80-point first drop at just 30 days late, and the ordered steps trace exactly where default becomes the point of no easy return, from charge-off through collections to a court judgment.
-
Exit Ticket (Student)
Telling delinquency apart from default is the first check, and later items name the last stop on the timeline and the move a borrower like Devon had available before things slid that far. Delinquency, default, and collections drive the response that follows.
-
Exit Ticket (Answer Key)
A deferment or a call to the lender is the kind of answer this rubric rewards, together with correctly tracing Devon's slide from delinquency into default and collections and using all three of those words.
-
Guided Notes (Student)
Devon's 720 credit score opens the page, and it falls in specific steps as the notes trace his $9,000 car loan from a first missed payment through charge-off, collections, and possible wage garnishment.
-
Guided Notes (Teacher Key)
80 points is the size of the single biggest credit-score drop, the hit Devon takes the moment his $9,000 car loan payment goes 30 days late for the first time, with charge-off still ahead.
-
Quiz (Student)
Five hundred five is where Devon's credit score lands after collections, and questions order his timeline from a 30-day late payment through a charge-off that still leaves the debt owed.
-
Quiz (Answer Key)
$649.50 a month is the garnishment figure marked correct, tied to the fact that Devon's charge-off never erases what he owes and his first missed payment costs him the most points.
-
Slides
One missed car payment starts the 30/60/90/120-day clock these slides climb, tracking a credit score falling 215 points to 505 through charge-off and collections before a court judgment lets a creditor garnish about $649.50 a month from a paycheck.
-
Teacher Guide
Six default stages knock Devon Carter's credit score down 215 points after he stops paying a $9,000 car loan instead of calling the lender. This 60-point guide's extensions write the phone call he should have made and practice the federal wage-garnishment cap.
-
Teacher Presentation Notes
A 215-point slide, from 720 to 505, traces Devon Carter's credit score through delinquency, charge-off, and collections, before wage garnishment shows it can still take up to $649.50 a month.
Download
Where should I send the next one?
Everything here is free and it stays that way. Leave your email and I'll send you the new lessons as they go up. You can unsubscribe from any one of them.
Related resources
Cosigning and Co-Borrowing - Sharing the Risk
Interest Explained - Simple vs Compound
Payday Loans - The 400 Percent APR Trap
Student Loans and Financial Aid
The Debt Snowball vs Avalanche - Paying It Off
What Is a Loan? Principal, Interest & Terms
Every lesson on this site is free to download and use. If one of them saved you a prep period, you can chip in a few bucks toward my three kids' daycare fund. That's genuinely where tips go.