Douglas Olsen
Student loan debt is a significant issue, with millions of borrowers defaulting on their loans. While it may be tempting to stop paying your student loans, there can be serious consequences for doing so, including wage garnishment, a lower credit rating, and difficulty accessing loans or credit cards in the future. If you are struggling to make payments, there may be options such as loan deferment or forbearance, which can provide a temporary pause on payments, but interest will continue to accrue. It is important to carefully consider the potential risks and explore alternative options before deciding to stop paying your student loans.
Characteristics and Values of stopping student loan payments
| Characteristics | Values |
|---|---|
| Consequences | Serious financial consequences, including hurting your credit rating and your ability to buy a car or house or get a credit card |
| Default | If your student loan payment is one day late, your account is delinquent. If it stays delinquent, it will go into default. |
| Garnishment | Defaulting on federal student loans will result in garnishment of social security payouts/benefits and wages |
| Co-signers | Any co-signers will be equally on the hook and forced to pay even though it’s not their debt |
| Interest | Interest money owed will continue to accrue (grow) |
| Forbearance | Payments are suspended or reduced, but the interest owed continues to accrue |
| Deferment | Payments are postponed, but the interest owed continues to accrue |
| Collectors | Debt collectors will start knocking |
| Taxpayers | Resuming collections protects taxpayers from shouldering the cost of federal student loans |
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What You'll Learn
Consequences of not paying student loans
The consequences of not paying your student loans can be serious and far-reaching, with the severity of the impact depending on how late you are, how many payments you miss, and the type of loan you have—federal or private. Here are some of the potential consequences of not paying your student loans:
Late fees and interest accumulation
The first consequence of missing a payment is usually late fees. Most student loan servicers charge a penalty for late payments. In addition, interest continues to accumulate on the outstanding balance, making the amount you owe grow larger over time.
Delinquency and default
For federal student loans, you are considered delinquent the day after you miss a payment. If your payment is more than 90 days late, the lender may report it to credit bureaus, damaging your credit score. After 270 days of non-payment, federal student loans typically go into default. Private loans often have shorter timelines, with many considering a loan to be in default after 90 to 120 days of missed payments. Defaulting on your loans has serious consequences, including losing the ability to choose your federal repayment plan and apply for deferment or forbearance.
Wage garnishment
In the case of default, your loan servicer may be allowed to garnish your wages, meaning they can deduct a portion of your disposable income (up to 15%) without your consent to repay your loan. The government has the power to do this automatically for federal loans, while private lenders must first obtain a court order.
Tax refund interception
Both federal and private student loans may result in tax refund interception. This means that if you are expecting a tax refund, it could be taken to repay your overdue loans.
Credit damage
A default on your student loans can stay on your credit report for up to 7 years, impacting your ability to secure loans, credit cards, or mortgages in the future.
Loss of future federal student aid
Defaulting on federal student loans may result in losing the option to take out future federal student aid if you decide to return to school.
It is important to remember that there are options available to help manage your student loan payments and avoid default, such as changing your repayment plan, consolidating federal loans, or refinancing private loans. If you are struggling to make payments, it is advisable to contact your loan servicer and explore these options.
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Loan deferment
If you are struggling to pay your student loans, you may be able to defer your payments. Loan deferment is a temporary pause on your student loan payments for specific situations, such as active-duty military service or reenrollment in school. You can apply for a deferment with your loan servicer, but you must continue to make payments until your deferment is approved. The U.S. Department of Education has published a list of reasons that qualify someone for a deferment.
During deferment, you don't have to pay interest on the loan if you have a subsidized loan. However, if you have an unsubsidized loan, you are responsible for the interest during deferment. If you don't pay the interest, it will be added to your loan balance, increasing the overall amount you have to repay. Private student loans may or may not offer a deferment option, and the rules vary among lenders. If you are considering this option, contact your loan servicer as early as possible to discuss the terms and fees associated with postponing payments.
It is important to note that defaulting on student loans can have serious consequences. For federal loans, this can result in the garnishment of social security payouts and benefits. For private loans, lenders may sue and garnish wages, affecting your credit score and future borrowing abilities. Those with cosigners on their loans should be especially mindful of this, as it can create financial hardship for the cosigner. While some individuals may appear to be living comfortably while not paying their student loans, this is not a reliable indicator of the long-term consequences, and debt collectors may eventually become involved.
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Forbearance
If you are experiencing financial hardship, you may be able to stop making payments on your student loans by applying for forbearance. Forbearance is a temporary postponement or reduction of your student loan payments. It is important to note that forbearance is different for federal and private student loans.
Federal Student Loans
If you have federal student loans, you can apply for forbearance through your loan servicer, usually over the phone. Forbearance can be granted for up to 12 months at a time. During the forbearance period, you are still responsible for the interest that accrues. You can choose to pay the interest as it accrues, or it may be added to your loan balance when the forbearance ends. However, for Direct Loans, interest will not be added to your principal balance.
Private Student Loans
Private student loan forbearance varies and is generally more limited than federal loan forbearance. The terms and fees associated with postponing private student loan payments depend on your contract and applicable laws, and may differ for each loan servicer. It is important to contact your private student loan servicer as early as possible to explore this option and understand the specific terms and conditions.
It is worth noting that there may be other repayment options available if you are struggling to make your student loan payments. You may be able to enroll in a payment plan that lowers your monthly payment or consider income-driven repayment (IDR) plans.
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Loan delinquency
Failing to pay your student loans can have serious consequences, and loan delinquency is on the rise, with nearly one in three student loan borrowers at risk of defaulting on payments. Delinquency can ruin your finances and your credit score, and federal student loans are reported to credit bureaus after 90 days of missed payments. Private loans can report delinquencies after just 30 days, and private lenders may sue and garnish wages. Defaulting on federal student loans can also result in the garnishment of social security payouts and benefits.
If you are struggling to make payments, it is important to contact your lender as soon as possible to try to find a solution. It is not advisable to simply stop paying your student loans, as this can have serious repercussions for your financial situation and credit score. It can also impact any cosigners you have, who may be forced to pay if you default.
While it may be tempting to stop paying your student loans, especially after the COVID-19 repayment pause, it is important to remember that this can have long-term negative consequences for your financial health. It is always best to try to work out a solution with your lender, such as an affordable repayment plan, rather than risking delinquency and default.
In summary, loan delinquency is a serious issue that can have detrimental effects on your finances and credit score. It is important to prioritize staying current on your loan payments to avoid these negative consequences and maintain your financial stability.
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Loan forgiveness
While it is not advisable to stop paying your student loans, there are some options for loan forgiveness that you may qualify for.
The Public Service Loan Forgiveness (PSLF) Program is one option. This program allows federal student loans to be forgiven after 120 qualifying payments (10 years) while working for a qualifying public service employer. Qualifying employers include government, federal, state, local, or tribal agencies, as well as certain non-profit organizations. Public service employees in fields such as firefighting, policing, nursing, and other emergency services may be eligible for this program.
Another option is an Income-Driven Repayment (IDR) plan. These plans cap your monthly payments based on your income and family size. If your income is low enough, your payment could be as low as $0 per month. Under an IDR plan, the remaining balance on your loans may be forgiven after 20 or 25 years of repayment. This option is available for borrowers with federal student loans managed by the Department of Education (ED) and some borrowers with FFELP loans.
It is important to note that only federal Direct Loans can be forgiven through PSLF, and private loans are not eligible for loan forgiveness. Additionally, defaulting on federal student loans can result in garnishment of wages and social security benefits, negatively impacting your credit score and financial situation. Seeking loan forgiveness through official channels and maintaining regular payments, where possible, is a safer approach to managing student loan debt.
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Frequently asked questions
Not paying your student loan has serious consequences. Your account will be delinquent and if it stays delinquent, it will go into default. Defaulting on federal student loans will also result in garnishment of social security payouts/benefits. Private loans will sue you and eventually garnish your wages.
If you are having trouble paying back your student loans, you may qualify for loan deferment or forbearance. In both cases, the interest money you owe will continue to accrue (grow). You can also contact your loan servicer to get your payments back on track.
The U.S. Department of Education resumed collections of its defaulted federal student loan portfolio on May 5, 2025. The Department of Education is conducting a communications and outreach campaign to help borrowers understand how to return to repayment or get out of default.
