Wondering what happens if you don’t pay your student loans? In this article, we’ll take a closer look at what happens if you miss a student loan payment and what steps you can take to get your account back on track.
What Happens if You Don’t Pay Your Student Loans?
What happens if you never pay your student loans at all? There are a number of potential consequences:
- Late payments are reported to credit bureaus.
- Once your loan goes into default, the full amount becomes due immediately.
- Federal loan recipients lose access to income-driven repayment plans and other benefits.
- If you have a cosigner on your loan, they may suffer credit damage or become liable for the debt.
- Your wages may be garnished, and tax refunds and federal benefits may be seized.
Do unpaid student loans ever go away? In many cases, no. Many unpaid loans may come off your credit report after about seven years, but there’s no statute of limitations for federal loan collection. This means that federal student loans do not ever come off your credit report.
What Happens if You Miss a Student Loan Payment?
If you recently realized you’ve missed a loan payment, don’t panic. Missing one payment isn’t the same as going into default. Simply make the payment as soon as possible.
What Happens if You Can’t Pay Your Student Loans?
Most people who stop paying their student loans don’t do so because they feel like it. In many cases, they simply can’t afford to.
If you fall into this category, you might be asking yourself, “What should I do if I can’t pay my student loans?” If you act quickly, you might be able to shield yourself from some of the serious consequences of defaulted loans.
If you have private loans, talk to your lender about your situation and ask what kind of relief they offer. For federal student loans, get in touch with your loan servicer to ask about one or more of the following options.
Income-Driven Repayment
Income-driven repayment (IDR) plans base your minimum monthly payments on the following factors:
- Your income
- The size of your family
- Your state of residence
If you’re on a standard repayment plan but don’t earn enough to keep up with your payment, this option may be right for you.
Deferment
Student loan deferment is when the lender authorizes a temporary payment pause. Student loans are usually deferred while you’re still in school, but other events (such as unemployment) can trigger deferment as well.
During deferment, interest continues to accrue on unsubsidized loans. However, it doesn’t accrue on subsidized loans.
Forbearance
Forbearance is another kind of payment pause. Unlike deferment, you don’t have to qualify based on a specific event. If you’re dealing with temporary economic hardship, forbearance can allow you to take the money you’d ordinarily put toward student loans and put it toward more immediate needs.
Interest continues to accrue during forbearance, and the pause usually won’t last more than 12 months at a time.
Rehabilitation
If your federal student loan is in default, loan rehabilitation may help you reinstate it. Here’s how it works:
- You and the collection agency (or other loan holder) commit to a rehabilitation agreement.
- You make nine consecutive, affordable monthly payments.
- The default record is removed from your credit report (although records of late payments stay).
Once you rehabilitate your loan, you might qualify for income-driven repayment plans and other federal loan benefits.
Consequences of Not Paying Student Loans: Private vs. Federal
No matter what kind of student loans you have, failing to make payments has major consequences. However, those consequences can vary considerably depending on whether you have federal or private loans.
What Can Happen if I Don’t Pay Student Loans at the Federal Level?
If you default on federal loans, which usually means you don’t make a payment for nine months or more, the government can garnish up to 15% of your disposable income. In this context, disposable income is the amount you make minus taxes and other required deductions.
If you default on your federal student loans and you’re set to receive a tax refund, the government can also seize that refund to put toward your loan.
What Happens if I Don’t Repay Private Student Loans?
What happens if you never pay your student loans from a private lender? Private lenders don’t have the direct authority to garnish wages like federal lenders do. However, they can still sell your debt to a collection agency, file a lawsuit against you, and get your wages garnished indirectly.
Notably, if you have a cosigner on your loan, the lender may also sue them for the debt. As such, you and the cosigner may both suffer substantial credit damage.
Can You Go to Jail or Prison for Not Paying Student Loans?
No. You can’t go to jail or prison for failing to pay your student loans. If a debt collector threatens you with imprisonment for non-payment, they’re violating the Fair Debt Collection Practices Act (FDCPA).
Can You Get Sued if You Don’t Pay Student Loans?
Yes. Private lenders may sue you if you default on your loans. However, if you have federal loans, your lender doesn’t have to sue because they can garnish your wages without a court order.
The Importance of Making Regular Payments
If you’ve taken on any student debt, you should have a solid understanding of what happens if you don’t pay your student loans. It’s also important to realize that you have options if you can’t afford to pay back your loans as agreed. When you’re proactive and solution-focused, you’ll have a far better chance of getting back on track.
