What happens when I default on my loan?

When you miss too many payments, your loan eventually becomes a "deemed distribution." 

This means that the unpaid balance on your loan is treated as taxable income - similar to withdrawing from your retirement account. GuideStone will issue you a tax form for this amount called a 1099R. The form will be sent in January of the following year.

Depending on your personal tax situation, you will likely owe taxes for the unpaid amount on the tax return for the year in which the loan becomes a deemed distribution. For example, if you defaulted on your loan this month (or any time this year), you will likely owe taxes for the unpaid loan balance when you file your taxes next year. If you are under age 59 1/2, your unpaid loan balance is treated as an early withdrawal likely requiring an additional 10% penalty tax, imposed by the IRS, that will be addressed when you file your taxes. 

Once your loan becomes a deemed distribution, you will not be able to borrow again unless you pay off the unpaid balance (plus any interest) or a foreclosure event occurs on your account. Please contact us to receive instructions on paying off your defaulted loan balance. 

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