Q: What happens if you never pay your student loans?

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Stanley tate

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If you never pay your student loans, interest will keep accruing, and, at some point, your loan will default. When that happens, your loans will be sent from your loan servicer to a collection agency; collection fees will be added to your loan balance; you'll lose access to federal financial aid, you'll be at risk for tax refund offset, Social Security garnishment; wage garnishment, and being sued.

On top of that, your credit score will take a hit, making it harder for you to get a credit card, car loan, mortgage, etc.

These are the general consequences that happen when you ignore your student loans.

What will specifically happen to you depends on the type of student loans you have (federal student or private student loans), whether you have a cosigner, and the applicable statute of limitations (federal student loans don't have an SOL; private student loans do).

What happens when you don't pay your federal student loans?

The first thing that happens when you don't pay federal student loans is your student loan servicer will report late monthly payments to the credit bureaus. Once there, those late payments are difficult to get removed from your credit report.

After that, you'll eventually end up defaulting. When that happens, depending on your loan type (Direct Loan or FFEL Loan) your servicer will send your loans to the Default Resolution Group or a guarantor like Trellis or ECMC.

From there, the DRG will send your loans to a private debt collection agency. That agency is who you will need to work with to go over your student loan repayment options for getting out of default.

For most borrowers, those options will include:

  • negotiate a settlement
  • enter into the loan rehabilitation program or
  • apply for loan consolidation

Federal student loan settlements aren't cheap. They'll demand about 85-90% of the current balance less collection fees. As a result, most people get out of default through the loan rehabilitation program or by getting a Direct Consolidation Loan.

Click here to learn Should I Rehabilitate or Consolidate Out of Default?

What happens when you don't pay your private student loans?

When you don't pay your private loans, your student loan servicer will first offer you different repayment plans (like Navient's Interest Rate Repayment Plan) or ask if you want a deferment/forbearance.

At some point, both of those options stop being effective. The student loan payments you make under an interest rate only type repayment plan do nothing to your loan balance. You usually end up owing more than when you started. And sooner or later, you'll run out of deferments and forbearances.

So what do you do then?

You could look into refinancing with a different private lender. But depending on how much student debt you have, you may not be able to find a lender willing to help.

When refinancing isn't an option, and you can't afford the monthly payments, your options are to:

  • try and negotiate a student loan settlement,
  • file bankruptcy on your student loans, or
  • simply stop paying and wait to be sued.

Is negotiating a private student loan settlement possible? Absolutely. Is it guaranteed? Absolutely not.

The same is true of filing bankruptcy on your student loans. Can you do it? Sure. Will you get rid of your loans in bankruptcy? Maybe.

But when you can't afford the student loan payments and the loan servicer isn't working with you despite your financial hardship, what can you do?

Click here to read Guide to Negotiating Student Loan Settlements

Coronavirus/COVID-19 Update

When the coronavirus pandemic first hit in the United States, the federal government passed the CARES Act to, in part, help student loan borrowers.

The CARES Act directed the US Department of Education to suspend monthly payments, stop the interest rate from accruing, and give borrowers credit towards the student loan forgiveness programs they were pursuing (e.g., Public Service Loan Forgiveness).

For borrowers in student loan default, the Act also directed the Department of Education to stop wage garnishment, stop tax refund offset, and to stop collecting on the student loan debt.

Two things to note about these benefits: First, they only apply to federal loans owed directly to the Department of Education.

Use your Federal Student Aid ID to check studentaid.gov to see who owns your loans. Pay particular attention to Perkins Loans and Federal Family Education Loans. Those loans may be owned by someone other than the Department of Education.

Second, the benefits last until September 30, 2020. After that, the collection activity will start where it left off. So if you were being garnished before COVID-19, you'll be garnished after.


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Hey, I’m Tate.

I'm a student loan lawyer that helps people like you with their federal and private student loans wherever they live.

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