What Happens If You Stop Paying Your Student Loans?

January 28, 2022


If you’re one of the 44 million Americans who carry student loan debt, you may have fantasized about a life without monthly payments. It might seem very tempting, especially if you are struggling financially. However, no matter how you look at it, the consequences of ditching your payments outweigh the benefits.

Here is what happens if you stop paying:

You Deal with Delinquency

The first big consequence is delinquency. This occurs after being 90 days overdue. Your delinquent account will be reported to all three credit-reporting agencies. As a result, your credit score will dip, making it difficult for you to get approved for new credit cards or loans.

You Go Deep into Default

After being 270 days overdue, your loan is considered “in default.” This means that your account is referred to a collection agency, which will attempt to collect the debt from you. It may even add fees to your total for its effort.

Finally, the government may get involved as a last resort. This probably will not happen for a while, but you want to avoid it as much as possible. Uncle Sam has the power to take your tax refund and even garnish your wages to pay off what you owe.

And in case bankruptcy seems like a solution, you should know that student loan debt is typically non-dischargeable. In other words, you will still have to pay it off.

Here’s How to Handle It

If you’re having trouble keeping up with student loan payments, delinquency and default are not your only option. First, you should examine your budget to see if there are areas where you can cut back.

If not, contact your loan servicer and find out if you qualify for alternate repayment programs. You just might be able to lower your monthly payment.

September 2018