What Happens If I Don't Pay My Student Loans?

Wondering what will happen if you don't pay your student loans? We got you covered with all the information on Student loan delinquency, default, and other necessary details that you might have missed out.

Updated by Sharan Kumar on 22nd November 2019

When you refuse to make payments for your student loans, you might not get arrested or have U.S. marshals banging on your door. However, it still is a bad idea to let your debt build-up. It might affect your financial record causing undesirable damages. This will affect your creditworthiness and ultimately stop you from ever getting any other kinds of loans in the future.

In most aspects, letting your student loans fall into default has about the same effects as to have outstanding credit on your credit card that you are unable to pay. Although in some cases it could be a lot worse.

Most of the student loans are guaranteed through the U.S. Federal Government. So, in terms of power over the collection of debt the feds trump the debt collectors at any given day of the week. Let us take a closer look at what could happen if you continue to refuse to pay your student loans.

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Delinquency and Default

If you fail to pay your loans on time, you will fall into delinquency. If this continues for a longer period of time, your loans will get defaulted. The process of both is given here. 


When you fail to make the necessary payments even after 90 days past your due, your loan will fall into what we called delinquency. You are considered 'delinquent'. This issue will be reported to all the major credit bureaus. Your credit score will take its first hit.

With a history of delinquency, you will be considered a risky borrower. So, when you request any new loans or credit, you will either get denied or be charged higher interest rates than you normally would have been. Remember, it takes quite a bit of time to come back on track. A bad credit score will follow you in all sorts of ways.

Let us look at situations where this may become a problem.

  • Employers may check your credit scores to test your responsibility, compliance, and punctuality

  • Cell Phone networks may deny service contracts to applicants with bad credit scores

  • Utility companies may ask for a huge amount of security deposits if they consider your financial situation as risky

  • Many landlords in bigger estates may deny or ask for huge security deposits if they find out your credit score to be insufficient


If you fail to make payments on your student loans for 270 days, your lender or servicer will process your report which will be sent to a collection agency. There is a 90 days widow for the process of sending this report. Hence, you have 270+90 days to make a payment before your loan is reported.

Once your loan has been reported, it will be considered as 'default'. Your credit record will take another hit with a defaulted loan in the record.

An agent or a team will be assigned from the agency to process collections. They will contact you and find ways to let you pay your debt by several methods, which are not prohibited by the Fair Debt Collection Practices Act. The collection amount will be higher than your actual debt since collection fees are now required which will help collection agencies cover the cost of their effort.

The Federal Government is always a little more lenient when it comes to collections. It might take them a couple of years or two before they initiate the collection process. However, if collections are ever initiated by them, they will do more than just give you phone calls or knock on your door.

They have the power to seize your tax refunds to arrange the necessary payments for your debt. In worse cases, they might initiate seizures of your income. They will directly seize a part of your income to make payments for your debt.

Such nasty situations can be avoided by making regular payments to your student loans.

What is it that can be done to deal with this?

It is always advisable to pay attention to your due dates and make the necessary payments on your student loans. However, if you face any major financial issues that will affect your regular payments, you have the following options. Kindly take this information to make a decision based on the most practical solution for your case.

1 - Deferment and Forbearance

Federal student loans come with the option to defer your payments for up to 12 months if you ever face any financial hardship. Your hardship may be because of the loss of a job, unexpected medical situations, or any other unavoidable circumstances.

You have to immediately inform your situation to your loan servicer. They will analyze your situation and tell you whether you are eligible for Deferment or Forbearance.

Private student loan lenders do not always provide these options. It is always wise to check with your loan servicer beforehand. Learn more on deferment and forbearance

2 -  Change in repayment plans

In case your situation no longer supports your current monthly payment amount, you could always change your repayment plans. This is suitable when you face situations such as reduction of income, increase in family size, or you want to be eligible for the federal loan benefits like loan forgiveness.

You may opt for one of the Income-Driven Repayment (IDR) Plans if you are eligible. For most of these plans, you will only have 10-20% of your discretionary income as monthly payments. Moreover, any remaining loan amount is forgiven after you completed 20-25 years of regular on-time repayments

Private Student Loans might not be as extensive as federal loans on their repayment plans. It is always wise to check with your loan servicer beforehand.

3 - Refinancing

Refinancing is a process in which a refinancing company pays off all the loans you choose to refinance with a new loan from their company. This new refinanced loan gives you a chance to have a different interest rate, which may be much lower than your previous rate. It also allows you to combine multiple loans into one single loan. The terms of the new loan can be chosen based on your situation and requirements.

Although refinancing is a very appealing option for your private student loans, it is not the case for federal loans. When you refinance your federal loans, the refinancing company will make a payoff for your federal loans with a new loan from them. This new loan is now a private loan.

Consequently, you will no longer have the benefits of federal loans and its borrower protection programs such as a deferment, forbearance, or loan forgiveness. However, if refinancing will help you pay off your loan faster and at a lower cost, the option is still out there for you.

4 - Loan rehabilitation

Student loan rehabilitation is one of those options which are made for debtors who are stuck in a deep spiral of debts. They are considered as a desperate measure which does not always guarantee a positive outcome. However, it has helped many people get out of their student loans.

In this method, you contact Loan Rehabilitation Companies to help you with your student loan debt. They will ask for you to open a new savings account where you make monthly deposits.

They will negotiate with your current loan lender or servicer for better interest rates and plans for you. They will use the savings you made on your new account to make necessary payments to your lender and asks for fees from you in return. Learn more on loan rehabilitation 

5 - Declaration of bankruptcy

The ultimate option for debtors who can find no other way to crawl back out from their debt traps is the declaration of bankruptcy. After you file for bankruptcy, collectors will no longer be able to make contacts to request for payments.

Contact an attorney to find out the effect this might have on your future and also help you in the process of filing.

Learn more about student loan repayment options

Is there anything good about student loan debt?

Loans are essential for many of the students who are pursuing their higher studies. Not only for students but loan, in general, is a necessity for investors, entrepreneurs, and many others. Apart from the many stress that loans may cause us when to making repayment and saving our credit scores from taking hits, they also have positive impacts on our credit scores.

Your payments are reported to the credit bureaus on a regular basis, whether you make a payment or miss a payment. When you make regular on-time payments, your credit score increases. The increase in your credit score will build good financial trust over time.

An individual with a high credit score is considered to be creditworthy. Lenders will be willing to lend more amount of loans at much lower interest rates to them.

Learn more on student loans


The government and the banks have a very good reason for working with those that are having trouble paying off student loans. Student loan debt has reached a new record of low, with almost 44 million debtors. On average, these debtors owe a loan amount of about $34,000.

You might be right that the government and the banks are just as anxious and hungry to receive their money back but you also have a duty as a borrower. Your duty is to make regular repayments for the money you have borrowed.

So, keep in mind to get in touch with your lenders and servicers in case you see some potential trouble coming up ahead. Ignorance will only make it worse for both of you.