What Happens if You Don’t Pay Student Loans?

Total student debt soared north of $1.76 trillion in 2022, according to the Federal Reserve — and even with a federal payment pause, some borrowers can’t keep up. Among adults with outstanding student loans in 2021, 12% were behind on their payments, the Federal Reserve found.

The consequences of falling behind on college debt can be enduring and devastating. Here’s what can happen if you don’t pay student loans — and how to get help before missing a bill.

If you don’t pay your federal student loans

In March 2020, the Department of Education temporarily freed federal student loan borrowers from monthly payments. Borrowers have enjoyed that pandemic payment pause, known as forbearance, for longer than three years.

But when federal student loan payments resume — currently slated for the summer of 2023 — these borrowers will once again be at risk of serious financial consequences if they don’t pay each month. Here’s what can happen if you don’t pay federal student loans:

• If your payment is late by at least one day, your loan becomes delinquent. Your loan account remains delinquent until you repay the past-due amount or make other arrangements, such as deferment, forbearance or changing repayment plans.

• Once 30 days have passed since your first missed monthly payment, you may face late fees of up to six cents for each dollar of each late payment. 

• After 90 days, your federal student loan servicer will begin reporting the delinquency to the major national credit reporting agencies — Equifax, TransUnion and Experian. That can knock a lot of points off your credit score — and the higher your initial credit score, the larger this point deduction will be.

• After 270 days of missed payments, most federal student loans enter default.

» MORE: What happens if you miss a student loan payment?

If you don’t pay your private student loans

Private student loan payments were never put on hold during the pandemic. Consequences of missed payments may vary among private lenders; review your loan contracts for specific details. Generally, here’s what can happen if you don’t pay private student loans:

• If your payment is late by at least one day, your loan becomes delinquent. You may start facing late fees, which vary by private lender.

• Once at least 30 days have passed since your first missed payment, your private lender may begin reporting the delinquency to credit reporting agencies, according to the Consumer Financial Protection Bureau. Missed payments can really harm your score — the higher your score, the bigger hit you’re likely to see. 

• After missing three monthly payments (your bill is at least 90 days past due), private loans begin entering default, the CFPB says.

Student loans taken out by parents — federal parent PLUS loans and private parent loans — only impact the credit of the person who took them out. So, only the parent would face consequences for missed payments. However, ​​both student and parent (or other co-signer) are on the hook for co-signed private loans.

» MORE: How do student loans affect your credit score?

What does it mean to default on a student loan?

Student loan default means you are in breach of the contract you signed and collection efforts can begin. Default can also damage your credit history with a negative mark that sticks to your record for seven years from when it was first reported.

Consequences of federal student loan default

• Entire unpaid balance, including accrued interest, becomes due immediately.

• Lose access to temporary payment deferments if you lose your job or face other financial hardships. 

• Lose access to income-driven repayment plans, which can lower payments to as little as $0 per month based on your income. 

• Lose any credits toward Public Service Loan Forgiveness.

• Can’t receive additional federal student aid if you want to go back to school in the future.

• Wages, Social Security benefits and tax refunds may be garnished or withheld. 

• Lower credit score, which impacts your ability to buy a house or car, rent an apartment, take out future loans or get approved for a credit card.  

As of 2021, private collections agencies no longer manage defaulted federal student loans. The Default Resolution Group now oversees collections for all defaulted federal student loans held by the Education Department.

» MORE: ‘Fresh Start’: What student loan borrowers in default need to know

Consequences of private student loan default

• Potentially face collections fees.

• Lower credit score, which impacts your ability to buy a house or car, rent an apartment, take out future loans or get approved for a credit card.  

• If someone co-signed your private student loan, their credit score could suffer too. 

• Wages could be garnished — but private lenders must first sue you and win a court order before they can do so. They cannot seize tax refunds or Social Security checks. 

Private student loan lenders might try to collect your debt directly, or hire a collections agency to go after you. Consequences of default may vary by private lender; review your loan contracts for specific details.

What to do if you’re having payment trouble

Do everything you can to avoid missing payments. If you have federal student loans, contact your servicer to lower or pause payments. This could include:

• Enrolling in an income-driven repayment plan, which sets payments at a portion of your income (it could even be $0 per month if you’re unemployed).

• Applying for a student loan unemployment deferment.

• Applying for a student loan forbearance to pause loans.

If you have private student loans, your lender might offer options such as temporarily reduced payments or a short-term forbearance to pause loans.

» MORE: Deferment vs. forbearance: Which is right for your student loans?

Trustworthy organizations also offer student loan help, but watch out for scams. Legitimate groups won't call, text or email you with debt resolution offers. Avoid “debt relief” companies that promise immediate student loan forgiveness. If it sounds too good to be true, it usually is.

Here are some vetted student loan help resources to consider for information, advice or both; they are established organizations with verified histories: