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What Happens If You Don’t Pay Student Loans ? 10 Shocking Options

If you are among those who find it difficult to pay off their student loan, it’s important you know that you are not alone. You do not need to beat yourself up, though the consequences for defaulting on student loans are more severe than you can ever imagine.

Wondering what really happens if you don’t pay back your student loans? You will get your answer here and then ways to avoid it.

First and foremost, missing a student loan payment will damage your credit score and make it harder for you to borrow money in the future.

But beyond the credit score, the exact repercussions of default on your student loans depend on whether they are owned by the federal government or a private student loan company.

For federal student loans, if you don’t make payments for more than 270 days, your loans will be delinquent. It is not uncommon to have trouble paying off student debt.

According to the latest figures as of the date of this article, 11.5% of borrowers who started paying off federal student loans from 2013 to 2014 defaulted over the next three years.

It takes the average student borrower 20 years to repay their loans, and more than 44 million Americans currently have a total of $1.4 trillion in student debt.

While it may be tempting to completely avoid repaying student loans, it is important to continue managing your student loans, even if you can’t afford them right now, to avoid losing them. Because default on federal loans can have serious consequences.

As much as you fantasize about leaving the country or even go as far as faking your own death just so you won’t have to pay back your student loans, know that there’s a real way out. And that is what we will be showing you in this article.

The table of content below will help you navigate the article with ease.

What Happens if you Don’t Pay Back Your Student Loans

Everyone seems to be talking about paying or not being able to pay off their student loans. And that made me think. What happens to people who stop paying their student loans because they can’t pay them? Many people still owe their studies to the government or private lenders.

In many ways, default on a student loan has the exact same consequences as default on a credit card. However, at a key point, it can be much worse. The federal government guarantees most student loans, and federal authorities have powers that collection agents can only dream of.

It probably won’t be as bad as the armed quarterbacks on your doorstep, but it could be very unpleasant.

If you have missed a payment or are having trouble making payments, immediately contact and discuss your options with the organization that handles billing and other services for your loan to avoid default.

This is what will happen to you if you happen to be among those students that can’t pay their students loan:

You Can Avoid Being in This Shoe. Just Check Out How to Pay For Grad School Without Students’ Loan

Government will Sieze your Income

Student loans come from the federal government or from private lenders like banks because government loans offer lower interest rates and more flexible payment options.

Basically, undergraduate students can subscribe to:

  • Up to $5,500 per year in Perkins loans depending on financial need and other assistance
  • $5,500 to $12,500 per year in subsidized direct loans and unsubsidized direct loans

And if you can’t pay the federal government when you do, They always have a way to get their money back.

“The federal government has extraordinary collection powers,” says Jarvis. They can garnish wages without a court order, garnish tax refunds, intercept other federal benefits, including social security, within limits, and prevent borrowers from accessing additional financial assistance to return to school.

You must lose payments for nine months before the federal government starts taking your money, but rest assured they will when they find it. Imagine you get your paycheck per week only to find out that half of it is gone.

Even bankruptcy, the refuge of last resort for debtors over their heads, won’t help you with federal student loans that, like tax debts, are uncomfortable in bankruptcy. You can often erase credit card debt and medical bills, but sometimes not student loans.

If You Are a Medical Student, Here is How You Can Get Student Loans For Medical School

They will Sue You

When a student needs more money than the government will give him, he often turns to private lenders. Americans owe more than $150 billion to private student loan lenders.

Unlike the federal authorities, if you cannot repay your private loans, they must sue you to begin the collection process.

If they win (they generally do), they can hire a collection agency to sue you. “Third-party collection agencies use aggressive tactics,” says Jarvis.

You can expect phone calls all day, at home and work. (If a collection agency harasses you for any debt, know your rights.)

Private lenders do not allow you to miss payments as long as the government does. “Private student loans have many predetermined triggers, which generally include a single late payment,” says Jarvis.

It Will Lower Your Credit Score

Credit bureaus will not disclose the formula they use to calculate credit scores. “But we know that each late payment report has the potential to lower credit scores, and a default rating will also serve to lower the credit score,” Jarvis said.

In other words, expect an improvement in your score every time you miss a payment.

The lower your credit score, the more you will pay (or not be able to get):

  • Car insurance
  • a mortgage
  • car loans
  • Credit cards
  • cell phone plans

A low credit score can even make you unemployed. A study found that 60% of companies verify all or part of applicants’ credit ratings.

What Happens if You Don’t Pay Federal Student Loans

Federal student loans are often the best option for financing a degree because they offer low-interest rates and flexible repayment plans.

If you miss a payment on your federal student loans, you have 270 days to make a payment before your debt is delinquent. Once the federal student debt is due, the government can confiscate your salary, Social Security check, federal tax refund, and disability benefits.

The Department of Education often works with third-party collection agencies that will charge fines and fees for failing to make payments, sometimes up to 18% of your loan balance.

The government is also known to sue borrowers. The Justice Department reports that more than 3,300 student borrowers have been sued for default in the past two years. In almost all cases, the borrower loses. If the government wins, it can place a lien on your home and even force a sale.

Heather Jarvis, a student loan expert, told Vice that currently, “the federal government doesn’t often process because it doesn’t have to.” But they will if they think it will give them access to other assets. “

Experts predict that the federal prosecution program will expand in the coming years under the leadership of Secretary of Education Betsy DeVos.

What Happens if You Don’t Pay Private Student Loans

Private student loan companies are much less flexible than the federal government. Specific procedures for cases in which a borrower misses a payment vary depending on company policy, the borrower’s contract, and state law.

A student loan attorney, Joshua Cohen, told Business Insider: “The only recourse available to a private lender is to sue them, and they are using them under state law, and each state is different.”

Private student loan companies are known to sue students for default on their loans aggressively. For example, the National Collegiate, the country’s largest private student loan holder, lost a series of lawsuits nationwide because it sued borrowers without the necessary documents. In these cases, millions of debt balances have been settled.

In an email statement, New York Attorney General Eric T. Schneiderman told CNBC Make It: “These reports are deeply troubling, but unfortunately are in keeping with our increasingly cynical and free culture. We saw that the Student loan industry took over. “

There are steps you can take to protect yourself. Avoid predatory private loan companies and for-profit colleges and find the right payment plan for you.

If you have already borrowed money and a private student debtor is suing you, confirm that your accuser has all the required documents.

10 Shocking Options to Take if You Can’t Pay Your Student Loans

Student loan debt is a major responsibility, and it is also a growing crisis among graduates. You should never go into debt assuming you can get out of it. But if there is a possibility of not paying your student loans, there is nothing wrong with taking it.

Are there ways to avoid not paying student loans? Don’t cross your fingers and hope they will forget you.

If you can’t afford your student loans because times are tough, here are some options to consider.

#1. Go for Refinancing

Because student loans don’t go away, it’s important to make them manageable. For some borrowers, refinancing student loans can be a good way to lower interest rates, lower monthly payments, and combine all of your loans into one monthly payment.

This is especially true if you have good credit and a good track record (if these are a little fragile, you can also hire a co-debtor for better terms). You can refinance federal or private loans or a combination of both.

Remember that refinancing will disqualify you from government income-based deferment and payment programs, but it could save you hundreds of dollars on your monthly payments.

Refinancing is Legit not a Scam. Check Out this Earnest Student Loan Refinancing Review: Is Earnest Student Loan Legit or Scam

#2. Reach Out to a Student Loan Servicer

Instead of leaving your federal or private loans in the dark, contact your lending department immediately if you can’t make your student loan payments.

Your loan manager can discuss the options with you and help you keep up with your loans so you can take steps to avoid default on a student loan.

#3. Consider Changing your Repayment Plan

If you’re struggling with your federal student loans, you can also change your repayment plan.

Most federal student loans are eligible for income-oriented plans, which limit your monthly payments to 10-20% of your discretionary income.

Here are the different types of payment plans

Federal loans have some repayment plans. Let’s look at some of the different options available.

Standard, Graduated and Extended Repayment Plans

A standard payment plan has a fixed monthly payment. While a graduated or progressive payment plan begins your payments with a smaller amount and gradually increases. Meanwhile, an extended payment plan allows you to choose: your payments can be fixed or progressive.

Repayment periods for standard and progressive payment plans can be up to 10 years for individual loans or up to 30 years if your loans are consolidated. For extended payment plans, it can be up to 25 years.

Income-driven Repayment Plans

There are also instalment payment plans (also known as REPAYE and PAYE plans), but they generally cost more than the standard 10-year payment plan.

#4. Apply for a Direct Consolidation Loan

If you have trouble keeping track of multiple monthly payments, you may want to consider consolidation. Federal student loan holders can apply for a direct consolidation loan, which consolidates their loans into a single loan from a single lender and a monthly payment.

There are no application fees, and most federal student loans are eligible for consolidation. Private student loan holders are not eligible for a direct consolidation loan.

However, if you have a combination of private and federal loans, federal loans will still be eligible for consolidation and the total debt of student loans. Including private student loans will affect how long you have to repay your direct consolidation loan.

Since consolidation can offer up to 30 years to pay off your loans, your new monthly payment may be lower than your current payments. The bad side? You will probably pay more interest over the life of the loan, and you may lose some benefits, such as lower interest rates and cancellation benefits.

For this reason, it is important to weigh the costs and benefits before consolidating.

#5. Request for a Deferment or Forbearance

If you cannot pay your student loans because you are struggling financially or are having trouble finding work, you can defer your federal loans for up to three years.

If you do not qualify for a deferment, you may be eligible for an abstention, which may defer or reduce your payments for up to 12 months.

For medical expenses and financial difficulties, your lender approves general leniency. In other cases, you may be eligible for mandatory leniency if you meet certain eligibility conditions.

Borrowers must request deferment and forbearance and continue making payments until approved. During the leniency, you are responsible for paying the interest that accrues on all types of federal student loans.

However, you may not be responsible for paying the interest earned on certain types of loans during the deferment period, so make sure you understand how your specific situation works.

#6. Look into Loan Forgiveness

Another option you can consider is loan forgiveness.

Through the Public Service Loan Forgiveness Program, federal student loan borrowers working in public service with an elected government or nonprofit agency can cancel their loan after 10 years of eligible monthly payments.

Income-oriented plan borrowers may be eligible for loan forgiveness on their loan balance if they make eligible monthly payments for 20 to 25 years.

#7. Consider Serving your Country

In addition to the PSLF, there are loan repayment and forgiveness programs designed specifically for borrowers who have served in the military. Each branch has its own set of programs, such as the Air Force College Loan Repayment Program and the Army Student Loan Repayment Program.

Of course, joining the military to pay off your student loan debt may not be the smart thing to do. But if you’re currently on duty or planning to enlist, cancelling the loan is definitely a welcome benefit.

Volunteering with AmeriCorps or Peace Corps can also result in loan cancellation if the military is not your thing.

“Reducing part of your loan balance with a program like AmeriCorps may be a good idea. Then you can refinance the remaining balance and pay the rest of the debt yourself.

#8. Apply for a Disability Discharge

No one wants to imagine the worst that will happen, but sometimes they do. Fortunately, if you become disabled and unable to repay your student loans, the Total and Permanent Disability Leave (TPD) program can clear the list.

The program is available to most federal student loan borrowers, but not all types of loans are eligible. To apply, you must complete an application and provide documentation showing that you are totally and permanently disabled.

#9. Appeal to Your Employer

If you don’t qualify for these federal programs, there are always ways to get partial repayment of your student loans. A source could be your boss.

“Employers are increasingly offering help paying off student loans,” said Marquit. “However, this benefit does not come with tax benefits. So if your employer invests in the refund, this will be reflected as income when you report to the IRS.”

About 4% of organizations are helping their employees repay their loans, which is expected to increase rapidly this year. Your business may offer a student loan refund you don’t know about, so make sure you know about it.

What if your employer does not currently offer reimbursement assistance? Talk to your human resources department about adding it to the benefits package; asking never hurts.

#10. Talk to a Lawyer about Filing for Bankruptcy

A common myth about student debt is that it is impossible to break free from bankruptcy. “It is difficult but not impossible,” said Cohen. Often borrowers don’t try it because they assume it won’t work.

According to a lawyer, he said the key in most courts is to pass the Brunner exam. For student loans to be repaid, you must be able to demonstrate that you were unable to maintain a minimum standard of living as a result of the payments, that your situation will persist for a significant part of the repayment period, and that you have made a good-faith effort to repay the loans.

One hurdle to remember: filing for bankruptcy automatically defaults on your student loans. Someone filing for Chapter 11 bankruptcy might think, “Once I get rid of this credit card debt, I can focus on my student loans. The problem is that these loans are now past due, which means they are fully due.

If you are considering bankruptcy, your best course of action is to talk to a lawyer.

Paying Students Loan FAQs

Technically, you cannot go to jail for not paying your student loans, the Education Department assures borrowers. It is true that defaulting on student loan debt can lead to being arrested, but default alone is not a criminal offense.

Defaulted federal student loans either fall off seven years after the date of default, or seven years after the date the loan was transferred from the Federal Family Education Loan Program (FFEL) to the Department of Education.

If you don’t make your payment, your loan goes into delinquency status. … If you still don’t pay, your school, the financial institution that made or owns your loan, your loan guarantor, and the federal government can all take action to recover the money you owe for your student loan debt.

Actually there are 10 ways you can get rid of your student loans legally. It includes:

1. Go for Refinancing
2. Reach Out to a Student Loan Servicer
3. Consider Changing your Repayment Plan
4. Apply for a Direct Consolidation Loan
5. Request for a Deferment or Forbearance
6. Look into Loan Forgiveness
7. Consider Serving your Country
8. Apply for a Disability Discharge
9. Appeal to Your Employer
10. Talk to a Lawyer about Filing for Bankruptcy

Actually, you must pay off your student loans, even if you have assistance from the government or employee. However, there are ways to pay off your student loans legally:

1. Go for Refinancing
2. Reach Out to a Student Loan Servicer
3. Consider Changing your Repayment Plan
4. Apply for a Direct Consolidation Loan
5. Request for a Deferment or Forbearance
6. Look into Loan Forgiveness
7. Consider Serving your Country
8. Apply for a Disability Discharge
9. Appeal to Your Employer
10. Talk to a Lawyer about Filing for Bankruptcy

The debt is wiped after 30 years (ish) or if you die. Student loans only have a fixed life, though the exact time depends on which loan you have (see chart below). It’s also important to note that if you die the debt is wiped.

Student loan debt will not go away if you ignore it, except if you die or pay it up to 30 years.

In Conclusion

After all, is said and done, try at all means not to owe your student loan. You can work while you are in school. Many schools make provisions for students to work for some hours every week. It can be an escape route for you.

But if you acquire loans and find it difficult to pay your student loan, follow the steps above. You can apply for two or three and see your student loans going away quickly.

To be frank, you do not want to experience what happens if you don’t pay back your student loans!


  • – 5 options to consider if you can’t pay your student loans
  • – 8 Ways You Can Quit Paying Your Student Loans (Legally)
  • – This Is What Happens If You Don’t Pay Your Student Loans (And Yes: It’s Very, Very Bad)
  • – What happens when you don’t pay off your debt?
  • – What Happens If You Just Stop Paying Your Student Loans

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