Student loan payments can weigh on your monthly budget. They might be harder to manage while you're getting used to making payments for the first time after the years-long pandemic payment pause. Still, it's possible to get back into the groove of making payments. If you're not sure whether you can keep up with your debt, be mindful about your next steps. Missing payments can put you in a financially vulnerable place. There are other strategies you can use instead.
What happens if you don't pay student loans?
What happens if you don't pay your student loans depends on how late you are, how many payments you miss, and whether your loans are federal or private. Federal student loans might have rehabilitation and payment plan options, whereas private loans often go to collection agencies. The longer you fall behind on payments, generally the more serious the consequences. For example, defaulting on your student loans comes with more negative impacts than making a late payment.
How many days after missing a student loan payment do your loans go into default?
Federal student loans typically go into default if you're more than 270 days late on payment. But you might fall into the 12-month "on-ramp" to repaying federal student loans, which runs from October 1, 2023, through September 30, 2024. During that time, missed payments won't cause you to be considered delinquent or in default, and you won't be reported to credit bureaus or sent to collections. Still, interest on your federal loans accrues throughout this period, and it's better to make your federal student loan payments on time. So get organized about your payments, see if your employer offers repayment help, and make a plan.
The amount of time it takes to be considered in default on private loans varies, but it's usually much sooner than the 270 days it ordinarily takes for federal loans. Some private loans are considered to be in default after just 90 days of missed payments.
What happens if you default on student loans versus just being late? A loan default looks worse on your credit report than a late payment. And once your loans go into default, there's more serious action.
Here are some of the negative consequences for being late on loans.
Late fees
If you're more than 30 days late on a federal student loan payment, the lender could charge a late fee of up to 6% of the overdue amount. For example, if your payment was supposed to be $300, they might add another $18 to your balance—on top of interest that could keep accruing. Private lenders also charge late fees for each missed student loan payment.
Credit score damage
Your credit score is a representation of several factors, including how you've handled paying loans and credit card bills in the past. Lenders generally report missing student loan payments to the credit bureaus, which could cause your score to drop. A lower credit score could make it tougher and more expensive to borrow money in the future. If someone, such as a parent, co-signed your loans, missed payments can hurt their credit score too.
With federal student loans, lenders typically don't report missed payments to the credit bureaus until they're 90 days late. Private lenders may report after a payment is 30 days late.
Loss of plan flexibility
When you default on your loans, your whole loan balance is due immediately, so you lose the right to choose your federal repayment plan, giving you less control over how you pay off your debt. For instance, starting in July 2024, borrowers who haven't made a federal student loan payment in 75 days could be automatically moved to the newly introduced SAVE income-driven repayment plan.
Then there are the following consequences for defaulting on loans.
Loss of loan benefits
If you've defaulted on your federal student loans—meaning you have not made a payment in more than 270 days—you can no longer apply for deferment or forbearance. Those are options which let you delay payments because of financial hardship without the consequences of defaulting. But once you've already defaulted it's too late to request them. You would also lose the option to take out future federal student aid if you go back to school.
Wage garnishment
Wage garnishment means a creditor takes money out of your paycheck for repayment. Your loan servicer is allowed to deduct 15% of your disposable pay—earnings left after making legally required deductions, such as taxes and payments into Social Security, Medicare, and state unemployment insurance—for federal student loan payments, without taking you to court.
Treasury Offset
Your tax refund or any federal benefits you're entitled to can be withheld too for federal student loans. This is handled through the Treasury Offset Program, which collects past-due money owed to government agencies from other government programs that would ordinarily send money to the debtors.
Legal action
Private student lenders can't access the Treasury Offset Program, so they might opt to open a lawsuit and bring you to court to collect on what they're owed.
Collections agency involvement
Defaulting on your loans could get your debt sold to a collections agency. If that happens, the agency will persistently contact you to get you to pay up. But it's not just the constant messages that are annoying: They could charge you hefty collection fees, up to 18.5% of what you owe in federal loans. It could be far more than that for private defaulted loans.
Loss of your license
It depends on where you live and your profession, but teachers, health care providers, and lawyers have had their professional licenses suspended or even revoked because they fell behind on student loans. Obvious alert: It's harder to repay your loans when you can't keep or get a job in your field, so consider that before defaulting on your loans. Even if you don't need a license to work, you need a license to drive, and some states have snatched those from people who have defaulted on certain student loans.
How to get student loans out of default
With defaulted federal loans, you have the option to set up a loan rehabilitation program. The first step is to contact your lender. You must agree—in writing—to make 9 reasonable payments (the amount of which is determined by your lender) over the next 10 months.
If you make all the payments, your loans would no longer be in default. The default would no longer show up on your credit report (though the record of a late payment will still be there). The lender would no longer be able to garnish your wages. Plus, you'd regain lost student loan benefits, such as being able to apply for deferment or change your payment plan.
Another option is to consolidate your defaulted federal loan or loans into a new Direct Consolidation Loan. With consolidation, your loans get out of default faster. It takes 3 payments on the new loan, versus 9 with loan rehabilitation. And you'll regain your student loan benefits faster. One drawback with consolidating is that it doesn't remove the default from your credit report.
There aren't official rehabilitation programs for defaulted private loans, but you could contact your lender about options for getting out of default. With defaulted private loans that have been sent to collections, you could negotiate with the agency to lower the amount they'll accept from you to settle your debt. You might have better luck if you can pay in cash. Or you could contact an attorney for legal help.
Do student loans ever go away?
Here are some government programs and other circumstances that could help make your student loans go away.
- Income-driven repayment plan forgiveness: If you enroll in an income-driven repayment plan, your balance could possibly be forgiven after a certain amount of years of qualifying payments. But you wouldn't be able to get rid of your debt for a long time. For instance, on the new SAVE plan, people who borrowed $12,000 or less could get their balance canceled after 10 years of payments. For every additional $1,000 on the loan, the borrower would reach forgiveness after an extra year's worth of qualifying payments, up to 20 years for undergraduate loans or 25 for graduate loans. Generally, if you make lower monthly payments, the longer it could take for you to pay off your loans—and the more time your loans have to accrue interest.
- Public service loan forgiveness (PSLF): If you work in public service, either for the government or a not-for-profit organization, and make 120 qualifying monthly payments while working full time, you might qualify for the PSLF program and potentially have the rest of your federal student loans discharged, if found eligible. Success rates have been low in the past, but the Department of Education says they're working to fix that.
- Teacher loan forgiveness: Teachers who work 5 full, consecutive years at a qualifying lower-income school or educational service agency could have up to $17,500 of certain student loans discharged.
- Employer assistance: Your employer might offer a student debt assistance benefit along with your more traditional benefits. In fact, 55% of US employers are planning to offer or already offer some sort of student debt benefit, according to the Employee Benefit Research Institute.1
- Disability: If you suffer a permanent mental or physical disability that keeps you from working, the government could discharge your federal student loans.
- Closed institution forgiveness: If your school shut down while you were a student or shortly after you left, you could apply at Studentaid.gov to have your federal loans canceled.
- Death: If you pass away before paying off your federal loans, the remaining debt is discharged.
As for declaring bankruptcy, it's harder to get out of repaying student loans than other types of debt, such as credit cards and personal loans. The bankruptcy court must determine your student loans are creating an "undue hardship" for you and your family, based on your income, before you can walk away from them.
In terms of your credit, a default on student loans stays on your credit report for 7 years after your first missed payment. After that, it no longer shows up. Still, that's a long stretch with a serious red flag on your report.
What to do if you can't afford to repay your student loans
Now that you know what happens if you do not pay your student loans, you might wonder how to avoid those consequences. Luckily, you likely have options, including changing your repayment plan, consolidating federal loans, and refinancing private loans, all of which could make your monthly payment more affordable. Or you could apply for deferment or forbearance to temporarily pause payments. It could pay—and help you avoid the most serious financial consequences—to explore these options. Learn more about what to do if you can't pay your student loans.