What Can Happen if You Don't Pay Your Student Loans Back?

Jennifer CaloniaUpdated August 16, 2023

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

What happens if you don't pay student loans for an extended period of time is that they ultimately go into default. A student loan default impacts your finances — both immediately and in the long term.According to EducationData.org, 10% to 20% of student loans are currently in default.Before reaching this point, it’s important to understand the consequences of not paying your student loans — from delinquency to default — and how to better manage your student loan debt.Recommended: Average Student Loan Debt in the United States 2023-2024

Student Loan Delinquency

Your student loan account is marked as delinquent on the first day that follows your missed student loan payment due date. To return to good standing, you must make delinquent student loan payments in full or reach out to your lender or servicer to request alternative repayment arrangements. Once your student loan payment is 90 days past due, your loan servicer or lender can report the account delinquency to the three major credit bureaus: Experian, Equifax, and TransUnion. A delinquent status on your credit report can bring down your credit score. It can also make it challenging to get approved for new loans, consumer credit, or a rental unit, in addition to services like household utilities and homeowner’s insurance.Recommended: Refinancing Student Loans With a Low Income

Student Loan Default

A failure to pay student loans can worsen from a delinquent status into a “default” status if left unpaid for a longer period. Default timelines vary depending on the loan type. For example, missed Direct Loan payments that remain unpaid for at least 270 days are considered in default, while a private student loan can be reported in default at 90 days past the due date.A defaulted student loan affects your ability to borrow new student loans and other consumer credit, in addition to affecting your finances in various ways. Once your loan is in default, the entire amount of unpaid principal and interest becomes due immediately.

Student Loan Collections

One of the consequences of not paying student loans and going into default is that your unpaid account is sent to collections. At this point, your lender or a collection agency can take steps to collect on your debt through wage garnishment or other means.

Consequences of Not Paying Student Loans

Failure to pay student loans doesn’t simply have a short-term impact on your finances and borrowing ability; in fact, it can have an effect over multiple years. Here are some of the consequences you can expect to face for not paying student loans.

Late Fees

On top of being liable for your outstanding loan principal and interest, your lender might charge additional late fees and collection fees. These unpaid late fees are added to your principal amount and accrue interest, too.

Credit Score Impacts

Once you have an adverse mark on a student debt account, whether a delinquency or default, it will negatively affect your credit score as soon as it’s reported to the credit bureaus.Removing student loans from credit reports takes about seven years from the date of the default. During this time, it might be challenging to borrow consumer loans, like a mortgage to buy a home.

Loss of Loan Benefits

Borrowers who are in default also lose access to the federal loan benefits they once had. This includes participation in loan forgiveness programs, the ability to request deferment or forbearance, and the choice of an alternative repayment plan.Another consequence of not paying student loans and going into default is that you’ll no longer be eligible for federal student aid. This means losing access to new federal student loans, as well as federal grants and other student aid programs.

Tax Refund Withholding

If you fail to pay federal student loans, any future federal and state income tax refunds can be withheld via Treasury offset. The funds are redirected toward paying down your past-due student loan debt.

Cosigner Involvement

Any cosigners who are on your delinquent or defaulted student loans will be negatively impacted by your nonpayment. They immediately will also be held liable for repaying the loan, and the adverse loan account will affect their credit history.

Wage Garnishment

Up to 15% of your disposable income can be garnished from your wages through your employer, if you fail to pay your federal student loans. This arrangement can be enacted by your loan holder without first taking you to court.

Social Security Garnishment

In addition to a Treasury offset and wage garnishment, your Social Security retirement benefit payments can also be garnished to repay your defaulted federal loan.

Suspension of Driver’s or Professional License

Another consequence of not paying student loans is potentially having your driver’s license or professional license suspended. This might impact you if you rely on driving a vehicle to get to work, require a special driver-class license as part of your job, or need to renew your professional license to continue practicing. Put simply, a license suspension due to federal student loan default can greatly affect your career.

Can You Go to Jail for Not Paying Back Student Loans?

As you can see, what happens if you don't pay student loans can be considerable if you continue to leave your debt unpaid. Despite the list of consequences, however, a jail sentence isn’t among the repercussions you can expect. Nonpayment offenses that might result in arrest or a jail sentence include unpaid federal taxes or failing to pay court-mandated child support. Student loans are considered civil debt, which isn’t an arrestable offense. But if you’re issued a court order about your debt and decide not to appear, you could be held in contempt of the court and arrested.

Ways to Make Your Student Loan Payments More Manageable

There are ways to reduce or manage your student loan debt before you even miss a payment. Exploring one of the options below can help you avoid delinquency or default:

Student loan forgiveness: Student loan forgiveness programs, such as Public Service Loan Forgiveness, are available to eligible federal student loan borrowers. You must make 120 qualifying payments toward your federal loans, and meet the program’s other eligibility and employment requirements.
Student loan deferment: Loan deferment temporarily pauses your required monthly payments. During this time, your loan will accrue interest, which is capitalized. Learn more about this repayment relief option in our student loan deferment guide.
Student loan refinancing: A student loan refinance repays your original student loans, and creates a new loan. It can allow you to secure a lower interest rate. Or, it could offer a lower monthly payment by extending your repayment term; however, this means you’ll pay more toward your debt in the long-run. Always weigh the risks and benefits of refinancing a student loan based on your unique student debt situation.
Income-driven repayment plans: Federal loan borrowers can request one of the Department of Education's income-driven repayment plans, which might reduce your monthly payment to as low as $0 if you’re eligible. he repayment period for income-driven repayment plans varies from 20 to 25 years. President Biden has announced the creation of the Saving on a Valuable Education (SAVE) Plan, which replaces the existing Revised Pay As You Earn (REPAYE) Plan. According to the White House, the SAVE Plan provides the lowest monthly payments of any IDR plan available to nearly all student borrowers.
For more repayment strategies, read our guide to paying off student loans.

Student Loan Refinancing With Lantern

Remember to always consider your long-term needs, in addition to finding a manageable solution for your student loan repayment plan.By refinancing your federal student loans, for instance, you’ll lose access to government benefits, like income-driven repayment and extended deferment and forbearance options that can be useful in the future.If you believe that a student loan refinance can help you manage your student loan debt, compare student loan refinancing rates from multiple lenders. Lantern’s refinancing marketplace lets you easily identify your borrowing options across various lenders, so you find the best fit.Compare student loan refinancing rates today!

Frequently Asked Questions

Can you go to jail for not paying student loans?

Do student loans go away after 7, 10, or 20 years?

Is paying back student loans avoidable?

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About the Author

Jennifer Calonia

Jennifer Calonia is a Los Angeles-based finance writer who has covered the gamut, including student loans, credit card rewards, consumer loans, and debt. Her work has been featured in outlets like Bankrate, NerdWallet, Business Insider, Yahoo Finance, and U.S. News.

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