Can you go to jail for not paying student loans?

Students often wonder what will happen in case they do not pay their student loans. Learn in detail what happens when you do not pay your student loans.

Updated by Chinmoy Dutta on 28th February 2020

Can someone be arrested for not paying their student loans? There were some incidents in the news, in 2016, where a man from Texas claimed he was arrested and forced by a judge to sign a repayment plan for a loan dating back to 1987. 

The news stories have students and loan borrowers wondering, ‘Can you go to jail for not paying student loans?’. The U.S. Department of Education assures that you cannot be sent to jail for not paying your student loans. Provided you oblige by the standard procedures after failing to make student loan payments, getting arrested is not a possibility.

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What happens if you don’t pay your student loans?


When your student loan payment is over 90 days due, it is officially declared as ‘delinquent’. It is then reported to all major credit bureaus and your credit score takes a hit. A bad credit rating means new applications on that credit rating might be denied. Sometimes, employers check credit ratings of applicants and can use it as a measure of character. Utility companies may demand a security deposit from customers they do not consider creditworthy, while landlords might reject your applications. As you may have already understood, the credit rating of an individual is extremely important, not only for taking loans but in all walks of life.

Loan Default

When your student loan payment is over 270 days due, it is officially declared as ‘in default’. The financial institution which is owed money shares your account with a collection agency, which tries its best to retrieve payment from you. Debt collectors charge fees to cover the cost of collecting money.

It is after several years that the federal government gets involved. It has considerable powers to retrieve the money from you. It can seize your tax refund and use it to recover your debt. It can also garnish your paycheck, meaning the government can contact your owner and a portion of a salary can be deducted to pay your debt.

The consequences related to student loan default are much severe than in delinquency. They can include:

  • There will be a significant decline in your credit score and the default remains on your credit report for seven years. This leads to difficulty in receiving favorable terms and better financial plans.

  • For defaulted private loans, private lenders may garnish your income provided they win a lawsuit against you.

  • For defaulted federal student loans, the federal government can seize your tax refund, government benefits and may even garnish your wages. Government benefits such as deferment, forbearance, access to flexible repayment plans, student loan forgiveness might be lost

Debt collectors first attempt to directly contact you for repayment, but if that doesn’t work they can file a suit to set up a repayment plan or garnish your wages. Legal proceedings might require a court appearance.

In case you fail to appear in court, only then a judge might issue a warrant for your arrest.

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What are the penalties imposed for not paying student loans?

Even though you won’t be directly arrested for not paying your student loans, several penalties might be imposed on you. When falling behind on your payments, the Department of Education loan servicers will try contacting you for almost a year. Student loans granted under the William D. Ford Federal Direct Loan Program and the Federal Family Education Loan Program go into default when payments are not made for at least 270 days.

When a default happens, the Department of Education establishes a repayment plan. If unsuccessful, other collection methods are employed. If all collection methods fail, the collection agency is required by law to turn your debt over to the Department of Justice. This, however, happens to less than 0.001% of student loans and even then you won’t be arrested.

Options available to you - What can you do to avoid penalties?

The dire consequences of penalties can be avoided but one needs to act before the loan moves into default. Many federal student loan programs are designed to help borrowers during their repayment phase and are available to all who have federal student loans, such as Stafford or Grad Plus loans.

Similar programs such as Income-Based Repayment (IBR), Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE), reduce loan payments to an affordable level based on applicant’s income and family size. The federal government may even contribute a part of the interest on the loan and forgives any remaining debt after payment is made for a period of 20-25 years of payments. 

Loan forgiveness has many criteria that an individual needs to fulfill to become eligible. The Public Service Loan Forgiveness Program is specifically designed for people working in public service jobs. There exist many federal programs available to student loan borrowers but it’s important to remember that these loans aren’t available on loans that have gone into default.

It is highly advisable to contact your lender as soon as you realize you have trouble keeping up with your payments. The lender might be able to work out a better repayment plan or guide you with a federal program. 

Reporting a Debt Collector

Repayment of student loans is an important phase where a borrower pays off the total amount of debt they owe. It can be stressful especially if someone is having trouble with keeping up with their payment which can be due to various reasons. As a borrower, you are required to pay your obligated debt, but you are entitled to be treated fairly and with respect throughout the process.

Professional behavior is expected from Debt Collectors. Under the Fair Debt Collection Practices Act, it is illegal for debt collectors to engage in abusive, unfair or deceptive practices. In case you feel you are being harassed by a debt collector, you can report them to the following agencies:

  • The Consumer Financial Protection Bureau

  • Your state attorney general 

  • The Federal Trade Commission 

How to avoid a court case?

If you are getting delayed in making payments for your student loans, there are ways to avoid a costly court case.

The most obvious step to take is to make a phone call to your lender. It doesn’t matter how late you are, your best option is to call your student loan servicer and explain your situation before your loan goes into default. It might seem scary at first, but it is better than incurring harsh penalties. The Federal government offers student loan debtors to return a delinquent debt to current.

There might be circumstances due to which a borrower may have missed payments such as financial hardships on losing a job or a case of a medical emergency. In these cases, these options can help you:

  • Deferment: This option allows you to make payments for an allotted amount of time, but the interest is accrued depending on the type of loans

  • Forbearance: In this option, your student loan payments are kept on hold for a specific length of time and interest is accrued regardless of the type of loan

  • Other options include enrolling in an Income-Driven Repayment (IDR) Plan

  • Private student loan lenders sometimes offer flexible repayment plans but usually, these plans are not as customer-friendly as an income-driven repayment plan.


Student loan debts are reaching higher numbers as time passes. This gives the bank and government an excellent reason for working with people who are facing problems in repaying their loans. They are as anxious to receive the money as you are about repaying it.

If your loans are currently in delinquent, default or are being handled by a collection agency, you cannot be arrested for outstanding debt on your student loans. However, to prevent future financial problems, you should act quickly and rectify the situation. The best option would be to contact your loan servicer.