Consequences of Student Loan Non-Payment

Many people need to turn to a student loan to help them finance their college educations. While some of them are able to go to school, graduate, and find a good job to pay off their debt, others aren't so fortunate. People are responsible for the student loan debt whether or not they finish classes, and sometimes this can make repayment difficult. The consequences for a defaulted student loan are intense. Rather than battling with the government over the debt, read on to find out more about what can happen if you don't pay the loans.

Collection Agencies

Just like any other debt, the student loan debt can go into collections. This means harassing phone calls, letters in the mail, and overall frustration. You'll be responsible for all fees incurred while attempting to collect the debt.


You can be sued for the entire amount of the loan. Plus, you'll be responsible for all legal fees and other fees incurred while trying to collect the debt.


The federal government can garnish up to 15% of your take home pay in order to pay back the debt. This could cause great financial hardship. It's better to pay the loans before this point is reached. If the income is social security, it is still possible for the payments to be garnished.

Credit File

The student loans will show up on a credit report as Sallie Mae and private lenders will report your payments to all three major credit bureaus. This will prohibit you from getting other loans and forms of credit. As more and more jobs are looking into the credit of applicants before choosing who to hire, not paying your student loans could even cost you a job.

Tax Returns

The federal and state governments will take the entire refund each year until the debt is paid to compensate for the defaulted student loans.

Ineligibility for Benefits

Having defaulted student loans will render you ineligible for many government benefits, including further financial aid to return to school. You will have to at least make arrangements and meet the obligations of those arrangements on time for six months in a row.

Ineligible to Enlist

Defaulted student loans may cause your enlistment into the armed forces to be denied.

No Deferments

You'll lose the ability to place the loans in deferment.

If you're considering filing for bankruptcy, don't think that will get rid of the student loan debt. Even private student loan debts are not forgiven with bankruptcy, as the bankruptcy laws are becoming tighter. If you can't pay your student loans, it is better to make arrangements and stick to them than it is to completely ignore the debt. Forbearance and deferment is available for 60 months throughout the 10 year payback structure.




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