{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/how-does-the-lender-determine-if-a-prior-federal-debt-delinquency-or-default-e-g-student-l","api_url":"https://dealroom.so/api/public/questions/how-does-the-lender-determine-if-a-prior-federal-debt-delinquency-or-default-e-g-student-l","question":"How does the lender determine if a prior federal debt delinquency or default (e.g., student loan, tax lien) impacts 7(a) loan eligibility?","topic":"Eligibility determinations","audience":"lender","bot_mode":"lender","short_answer":"Lenders determine the impact of prior federal debt delinquency or default by requiring the applicant to disclose all federal debts and verifying their current status. If the debt is in default, the applicant must have an approved repayment plan in place and be current on payments to be eligible.","rule":"SBA policy prohibits loans to applicants with a prior federal debt in default. Lenders must require all principals to disclose any past or present federal debt, including student loans, tax obligations, or prior SBA loans. The lender must verify the status of any identified federal debt. If a delinquency or default exists, the applicant must demonstrate an approved repayment plan with the responsible federal agency and be current on those payments. Failure to disclose or rehabilitate such debt makes the applicant ineligible.","example":"A 7(a) loan applicant discloses a past federal student loan default. The lender requires documentation from the Department of Education confirming an established repayment plan and verifies that the applicant has made all scheduled payments on time for the past 12 months, thereby satisfying eligibility requirements.","what_lenders_check":"Lenders must diligently check for all federal debt and ensure proper rehabilitation if a default exists. Overlooking or inadequately verifying the status of federal debt can lead to an ineligible borrower and subsequent guaranty denial.","required_facts":["Federal debt delinquency","Prior default","Eligibility impact","Repayment plan","Current payments"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans","SBA Form 1919 - Borrower Information Form"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"},{"title":"SBA Form 1919 - Borrower Information Form","url":"https://www.sba.gov/sites/default/files/2025-03/2025.02.27%20Form%201919%20-%20Updates%20%28FINAL%29_03-12-2025%20%281%29.pdf"}],"related_questions":[{"question":"Can a trust or an estate be an eligible borrower for an SBA 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/can-a-trust-or-an-estate-be-an-eligible-borrower-for-an-sba-7-a-loan"},{"question":"What constitutes \"passive income\" disqualifying a business from 7(a) loan eligibility?","url":"https://dealroom.so/for-lenders/questions/what-constitutes-passive-income-disqualifying-a-business-from-7-a-loan-eligibility"},{"question":"Are businesses that primarily derive revenue from real estate rentals eligible for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/are-businesses-that-primarily-derive-revenue-from-real-estate-rentals-eligible-for-a-7-a-l"},{"question":"Can a business primarily engaged in lending or investment be eligible for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/can-a-business-primarily-engaged-in-lending-or-investment-be-eligible-for-a-7-a-loan"},{"question":"What impact does a principal's recent federal tax lien have on 7(a) loan eligibility, even if paid?","url":"https://dealroom.so/for-lenders/questions/what-impact-does-a-principal-s-recent-federal-tax-lien-have-on-7-a-loan-eligibility-even-i"},{"question":"How does the SBA define 'passive business' making it ineligible for a 7(a) loan, and what specific activities might trigger this?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-define-passive-business-making-it-ineligible-for-a-7-a-loan-and-what-spec"}],"related_terms":[{"term":"Federal Debt Delinquency","url":"https://dealroom.so/glossary/federal-debt-delinquency"},{"term":"Federal Student Loan Default","url":"https://dealroom.so/glossary/federal-student-loan-default"},{"term":"Federal debt default","url":"https://dealroom.so/glossary/federal-debt-default"},{"term":"Federal Debt","url":"https://dealroom.so/glossary/federal-debt"},{"term":"Cure the Default","url":"https://dealroom.so/glossary/cure-the-default"},{"term":"Delinquency","url":"https://dealroom.so/glossary/delinquency"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/how-does-the-lender-determine-if-a-prior-federal-debt-delinquency-or-default-e-g-student-l","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}