What Happens If You Never Pay Your Student Loans?

What Happens If You Never Pay Your Student Loans?
Written by Publishing Team

If you never pay your student loans, your credit score will drop, you will have difficulty getting future credit and you may be sued by lenders. The short- and long-term consequences of not paying off student loans can be distressing, so it is essential to pay off your student loans on time or seek help if you are facing financial difficulty. Here’s what to know if you’re close to defaulting on a student loan.

Main Takeaway

Failure to pay student loans can result in late fees, damaged credit score, withholding of wages, and more. Talk to your lender about repayment alternatives if you’re struggling to keep up.

What Happens If Student Loans Don’t Pay Off?

Whether it’s your student loan payments or any other debt, if you don’t make your monthly payments, your finances can take hits from multiple angles. Here’s what can happen if you never pay your student loans.

Short term consequences

When one day you fall behind on your student loans, you are immediately considered delinquent. If you miss some payments, you may face consequences such as:

  • Late fees. A late payment you make eventually but not on the due date may result in a late fee. This amount varies by lender, and not all of them charge this fee, but it is very common to see a fixed late fee or fee that is a percentage of your missed payment.
  • Withholding tax refund. If you fall behind on your federal student loans, the government may withhold your refund until you are up to date on the payments.
  • Preservative withholding of wages. If you are a few months behind on your student loans, the lender may make moves to decorate your salary—sometimes up to 25 percent of your disposable income. He can do this until you pay off a portion of your loans and are in good standing.

Long term consequences

Loans are considered delinquent immediately after one payment is missed, but the lender or loan service provider may not report you late to the major credit bureaus until the 90-day due date is past. Here’s what can happen if your student loans don’t pay off any longer:

  • shortening. After several months of missed repayment, the loan will go into default. The exact timing and consequences of default varies for different lenders. In extreme cases, the entire student loan balance is due immediately.
  • Loss of eligibility for future aid. If you are currently in default, you could forfeit any future student assistance, including scholarships, grants, and federal student loans. The bad loans on your credit report can make it more difficult to buy a home, buy a car, or get a credit card.
  • Low credit score. The longer you work without paying your student loans, the higher your credit score.
  • potential lawsuits. The original lender can sell your loan to a debt collection agency, which can call you and send you messages in an attempt to collect a debt. To decorate wages, lenders will need to go to court. You may be sued if you do not repay your loans.

Do student loans fall after 7 years?

While negative information about your student loans may disappear from your credit reports after seven years, the same student loans will remain on your credit reports — and in your life — until you pay them off. In very rare cases, you may be able to get rid of your student loans through bankruptcy, but in general, the only way to hide your loans is to terminate the repayment.

How to get rid of student loans

If you are struggling to pay off your student loans, there are various payment plans that can help you maintain your existing loans without breaking the bank. Consider all of your options before choosing the best plan for your needs.

Income Paid Payment Plan

If you’re struggling to pay off your student loans, you can enroll all of your federal loans in an income-driven repayment plan. There are a few different payment options based on your needs, but they all have similar methods.

With each plan, you’ll make monthly payments based on your discretionary income and the size of your family. After 20 or 25 years, depending on the plan, the remaining balance on your loans is waived. You will need to update your information each year so that your payments accurately reflect your financial situation.

Public Service Loan Forgiveness (PSLF)

Public Service Loan Forgiveness is available to federal student loan borrowers who work in the public service field. After 10 years of making payments on an income-driven payment plan and working for a qualified employer, your remaining debts are cancelled.

The Biden administration recently announced drastic changes to the Public Service Loan Forgiveness Program. The pending changes are meant to make it easier for borrowers to qualify for this federal student loan forgiveness plan, so it’s time to sign up if you’re considering it.

Debt accumulation or debt collapse

If you have a mix of federal and private student loans or many different loans, you may want to consider a different approach. Debt cancellation plans, such as a snowball or debt meltdown, may help you get rid of student loan debt faster.

Using both methods of getting rid of debt, you start by listing each debt, including the total amount you owe, your monthly payment, the interest rate, and the due date. Next, make the minimum payments on all of your loans.

Here is where the strategy begins to differ.

  • For the snowball method, use every surplus dollar you have toward debt with the lowest balance.
  • For the debt avalanche method, put each surplus dollar toward the debt with the highest interest rate.

Repeat your chosen procedure until you pay off the first debt on your list. Then move on to the next smaller debt (or the one with the highest interest rate next) and repeat the process until all student loans are paid in full.


If you have high interest rates or many different student loans, you may want to consider refinancing. Refinancing is the process of obtaining a new loan to pay off all existing student loans. You’ll get new repayment terms and a new interest rate, then make one monthly payment on your refinanced loan until it’s paid off in full.

Note that you can only refinance your loans with private lenders, so proceed with caution. Federal loan refinancing means that you will lose certain benefits, such as patience or the option to enroll in an income-driven repayment plan. But if you have great credit and can get a lower interest rate than what you’re paying now, refinancing may make sense in certain situations.

Student loan settlement

A student loan settlement occurs when you settle your student loans for less than what you owe. If you’re a lot behind on your student loans and your credit score has already been affected, this option may work for you.

Keep in mind that you will need a lump sum to pay off the outstanding outstanding balance, and lenders are not required to settle. However, some lenders are willing to consider settling for less if it helps them collect a significant portion of your unpaid debts.

Can you discharge student loans in bankruptcy?

US bankruptcy law allows student loan forgiveness if borrowers can demonstrate that not doing so would be “undue hardship.” However, proving needless suffering has proven difficult. Borrowers must meet the three guidelines for undue hardship, called the Brunner test:

  • You can prove that if you are forced to repay the loan, you will not be able to maintain a minimum standard of living.
  • You prove that the hardship will last for most of the loan repayment period.
  • You have made a good faith effort to pay off the loan before filing for bankruptcy.

It is technically possible to discharge student loans in the event of bankruptcy, and there are currently attempts in the House and Senate to facilitate the disbursement of federal and private student loans. However, be aware that it will be an uphill battle to prove that paying off your student loans will impose undue hardship on you.

Do student loans fall off?

President Biden has indicated the possibility of student loan forgiveness during his campaign. So far, his administration has focused on reviewing existing tolerance programs, not implementing one-time forgiveness for all. As a result, it is necessary to continue to make your loan payments.

Even if something goes wrong with your forgiveness, you shouldn’t wait for it; Making your loan payments ensures that you don’t end up in default in the meantime. And remember, federal student loan borrowers aren’t required to make payments until after January 31, 2022, so you have some breathing time if you’re currently struggling.

bottom line

Failure to pay off student loans can have disastrous consequences for your finances, credit, and future borrowing prospects, so do your best to stay on top of your loans.

If you’re struggling, find a payment plan that works for you, such as an income-driven payment plan, or refinance your loans. Not paying off your student loans will hurt you for years to come, so the best course of action should be one that gets you back on the right track.

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