What happens if you default on an EIDL loan

Defaulting on a federal loan is serious, but the process is not instant and it is not a mystery. Knowing the timeline — and where your loan sits relative to the $200,000 line — tells you how exposed you actually are.

Short answer. Missed payments lead the SBA to charge off the loan and refer it to the U.S. Treasury, which adds a 30% collection fee and can seize federal payments (tax refunds, Social Security) through the Treasury Offset Program, garnish wages administratively, and in some cases sue. Whether your personal assets are exposed turns largely on the $200,000 personal-guarantee threshold.

The timeline of a default

It runs in stages: missed payments and accruing interest, then SBA collection notices, then charge-off once the SBA deems the debt uncollectable on its own, then referral to the Treasury. In April 2026 the SBA referred 562,000 loans worth $22.2 billion at once — so this is a bulk, systematic process, not a case-by-case chase.

What the Treasury can do

Once referred, the Treasury adds a 30% collection fee to the balance and can: offset federal payments — income-tax refunds, and even a portion of Social Security — under the Treasury Offset Program; impose administrative wage garnishment; and refer larger debts for litigation. These are federal collection powers that do not require a court judgment to begin.

The $200,000 line

Here is the distinction that changes everything. COVID EIDL required a personal guarantee only on loans over $200,000. If your loan was $200,000 or less, you signed no personal guarantee — so the SBA cannot pursue your personal assets on the guarantee, and for a closed business with no assets there may be little left to collect beyond federal offsets. Above $200,000, your personal guarantee is in play and personal exposure is real. (Loans over $25,000 also carry a lien on business assets.)

Getting ahead of it

Doing nothing is the worst option, because the 30% Treasury fee and offsets are hard to reverse. Before charge-off, ask about hardship. If the business cannot recover, an Offer in Compromise settles for less, and bankruptcy can discharge the debt. An attorney is worth it at this stage — but not a “forgiveness” service.

The scale of it

the record

By early 2026 about 1.3 million EIDL borrowers were in default and roughly $47 billion charged off. You are not an outlier, and you are not the first case the SBA has seen — which is exactly why acting early, on the record, matters more than hoping it is overlooked.

Common questions

What happens if I stop paying my EIDL loan?

The SBA charges off the loan and refers it to the Treasury, which adds a 30% fee and can offset federal payments like tax refunds, garnish wages, and in some cases sue.

Can the SBA take my house over an EIDL default?

Only if your loan was over $200,000, which required a personal guarantee. At $200,000 or less you signed no personal guarantee, so personal assets are not pledged — though federal offsets and wage garnishment can still apply.

What is the 30% fee on defaulted EIDL loans?

When a defaulted loan is referred to the U.S. Treasury for collection, the Treasury adds a collection fee of about 30% to the outstanding balance.

Offer in Compromise Hardship options Glossary: Treasury Offset Glossary: personal guarantee Glossary: charge-off Borrowing again after EIDL overview

Rules and figures here are current to mid-2026 and can change. This is education, not legal or financial advice — EIDL situations are individual. The SBA’s own hardship and settlement processes are free: deal with the SBA directly through the MySBA Loan Portal or CESC@sba.gov, and talk to a licensed attorney before an Offer in Compromise or bankruptcy. Portfolio figures come from SBA reporting and public records.