What Happens If You Don’t Pay Student Loans?

Piggy bank with graduation cap

Failing to repay your student loan debt (be it intentionally or because of hardship) can land you in hot water with your private lender or the Federal Government, as well as any cosigners who may have helped you get the financing. In fact, it’s one of the main reasons why federal student loan limits are put in place. So, what happens if you don’t pay student loans? Learn more about student loan default and possible penalties you could face for not repaying your outstanding balance.

Defaulting on Student Loans

Like most loans, student loans have a grace period (typically 28 days) in which you can be late before you become delinquent. After your grace period has expired, you’ll start getting calls asking you to make your payment in full or to set up payment arrangements. If you fail to make your payments, you’ll slide into default status.

After 90 days without payment, your loan is seriously delinquent — a fact your lender will report to the three credit bureaus. This black mark can make it hard for you to rent a home, get a credit card, and even apply for certain jobs. You’ll also see late fees added onto your account.

After 270 days, your account goes into default.  That means the lender has accepted you won’t be paying them back voluntarily and will do everything legally permissible to get the money from you. Actions could include garnishing your wages and tax returns, referring you to a collection’s agency, and tacking hefty fines onto your already bloated loan.

Penalties for Defaulting on Student Loans

In addition to credit damage, wage and tax return garnishment, and being reported a collection agency, you could face other consequences, including:

  • Immediate demand for full repayment plus penalties
  • Loss of eligibility for debt-relief programs, such as student loan forgiveness
  • Loss of eligibility for state and federal financial aid
  • Garnishment of Social Security payments
  • Lien against any property you own
  • Lawsuits and other legal actions

If you can’t be forced to pay the fees and penalties accrued from defaulting on your student loans, your parents or cosigners will also be held responsible, which could potentially damage your relationship.

Let Xpress Cash Help You Get Back on Track!

For help refinancing your student loans or information on other financial products available, contact a finance specialist at Xpress Cash. We have locations Michigan, Idaho, or Wisconsin from which we can assist you.