What happens if you don't pay student loans?

Failing to pay your student loans can have serious financial and credit consequences. But there are ways to make your payments more manageable.

Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as "Credible" below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.

What happens if you don’t pay student loans? Learn about the short- and long-term consequences you may face. (Shutterstock)

Student loan debt can be overwhelming. If you don’t think you can make your student loan payments, you have options — but it’s best to act quickly. Keep reading to learn what happens if you don’t pay student loans, and how you can avoid falling behind on your student loan payments.

If you’re looking into student loans, you can use Credible to compare private student loan rates and learn about your options.

What happens if you don’t pay student loans?

The type of student loans you have determines what happens in this situation. You may face both short- and long-term consequences.

If you took out federal Direct Subsidized, Direct Unsubsidized, or Federal Family Education (FFEL) Loans, you have a six-month grace period that starts right after you graduate. During the grace period, you don’t have to make any payments on your student loan debt. This is a time for you to graduate, find a job, and begin to earn money. 

Unlike federal loans, not all private lenders offer grace periods, so you might not have this luxury if you have private student loans. You may have to start making payments immediately after graduation. 

What happens in the short term?

Federal and private student loans have slightly different short-term consequences when you fail to make payments.

Federal student loans

  • If your payment is one day late — If you’re one day late on your student loan payments, your loan will be considered delinquent. It’ll remain this way until you cover the past-due balance plus any fees, or make alternative arrangements (deferment, forbearance, or changing your repayment plan).
  • If your payment is 30 days late — If you don’t make your entire monthly student loan payment within 30 days of when it’s due, you might get hit with late fees, depending on your loan servicer.
  • If your payment is 90 days late — If you stay in delinquent status on your federal student loans for 90 days or more, your loan servicer will report it to the major credit bureaus, which can affect your credit score.

Private student loans

  • If your payment is one day late — If you’re one day late on your private student loan payments, your loan will be delinquent. Depending on the lender, you might have to pay late fees.
  • If your payment is 30 to 45 days late — If you’re anywhere from 30 to 45 days late, the lender might report your delinquency to the credit bureaus.
  • If your payment is 90 days late — If you’re 90 days behind on your payments and in default, a private lender may hire a collections agency or take you to court in order to collect the debt.

What happens in the long term?

The long-term consequences of missing payments are also slightly different for federal and private student loans.

Federal student loans 

  • If your payment is more than 270 days late — Your federal loans will go into default if you don’t make payments for 270 days or more. At this point, your wages may be garnished or funds from your tax refund or Social Security check could be taken and applied toward your loans.

Private student loans 

  • If your payment is more than 120 days late — If you’re more than 120 days past due on your private student loans, they’ll be in default. A private lender will likely sell your debt to a collections agency and get the loan off its plate. The lender might also pursue a lawsuit if necessary.

Credible lets you compare private student loan rates from various lenders without affecting your credit.

What should you do if you can’t make your federal student loan payments?

Since you’re not required to make payments on federal student loans until after May 1, 2022, you do have some breathing room. But your payments will resume after that date, so it’s important to explore a number of solutions. 

Take advantage of Public Service Loan Forgiveness, if eligible

If you have federal student loans and pursue a public service career, Public Service Loan Forgiveness (PSLF) might be an option. When you work full-time for the federal government or a qualifying not-for-profit organization and make 120 qualifying payments on your Direct Loans under an income-driven repayment plan, your remaining debt will be forgiven. Unfortunately, PSLF isn’t an option for private student loans. 

Consider deferment or forbearance

With deferment or forbearance, you can request a temporary pause on your student loan payments. If you have eligible federal student loans, interest will continue to accrue with forbearance but may not during deferment. When it comes to private loans, deferment and forbearance availability varies by lender. 

Contact your lender immediately 

If you’re late on a student loan payment or think you’ll miss one in the future, reach out to your lender as soon as possible to explore your options. Your lender may help you come up with a plan so you can get current and may even waive fees, especially if you’ve made your payments on time in the past. 

Change your payment plan

An income-driven repayment plan may make sense if you’re struggling with your federal student loan payments. It’ll base your monthly payment on your income and even lengthen your repayment term. 

If you’re already on an income-driven repayment plan and it’s not working out, consider switching to a different plan. You might want to use the Loan Simulator on the Federal Student Aid website to find out if you’re eligible for a repayment plan with a lower monthly payment. 

Use loan rehabilitation

To rehabilitate defaulted federal student loans, you’ll need to make nine continuous, on-time payments within 10 months, depending on the type of loans you have. Once you do, your default status will be removed from your loans and credit history. Loan rehabilitation is more common with federal student loans than private student loans. If you have private loans, contact your lender to find out if this is an option.

Consolidate or refinance your loans 

If you have high interest rates on several student loans, you might want to consolidate or refinance your loans. Consolidation applies to federal loans only, but you can refinance private loans or a mixture of private and federal loans. When you consolidate your federal loans into a Direct Consolidation Loan, you combine all your loans into one manageable monthly payment — your interest rate will be an average of the interest rates on the loans you consolidate. 

Refinancing is when you take out a new loan with a new interest rate or different loan term to repay your student loans. If your financial situation has improved since you first applied for student loans, or you have a cosigner with good credit, you may be able to qualify for a lower interest rate when you refinance. Keep in mind that when you refinance federal loans into a private student loan, you’ll lose out on federal benefits like income-driven repayment plans and forbearance. 

Use a debt repayment strategy

A debt repayment strategy can help you pay off your student loan debt if you’re struggling. Some of the most common debt repayment strategies include:

Debt snowball method

With the debt snowball method, you pay off your smallest debt first, then apply the payments that you were previously using toward that debt to pay off the next-smallest debt. That way, you’re building momentum, or "snowballing" your payments as you repay  each debt. If you’re overwhelmed with debt and want to stay motivated by seeing balances disappear faster, the debt snowball method can be a good option.

Debt avalanche method

With the debt avalanche method, you prioritize your highest-interest debts so you can save on interest. If you want to spend as little as possible on interest and don’t need positive reinforcement from knocking out loans quickly, the debt avalanche method should be on your radar.

Credit counseling 

With credit counseling, a nonprofit credit counseling agency helps you figure out the best way to repay your student loans. A credit counselor will take a close look at your student debt and finances. Then, they’ll recommend a repayment plan, which may include consolidation, applying for student loan forgiveness, or even filing for bankruptcy to try to get your loans discharged. (Just keep in mind that filing for bankruptcy should always be considered as a last resort.)

Debt settlement 

Debt settlement is when you hire a company to negotiate with your creditors and convince them to settle your debts for less than you owe. In most cases, you’ll deposit money into a special account every month. Once your balance reaches a certain amount, the debt settlement company will consult your creditors and negotiate a lower settlement amount. Keep in mind that you’ll have to pay a fee to use this service.

Do student loan payments stay on your credit report?

If you make a late payment on a student loan, or any credit account like a car loan or credit card, it’ll remain on your credit reports for up to seven years. In the event that your loan goes into default, the clock won’t reset. It’ll stay on your reports for up to seven years from the date of your first missed payment.

That’s why it’s important to make your student loan payments on time, every time. If you fail to do so, you could damage your credit and make it difficult to qualify for financing down the road.

Credible lets you easily compare private student loan rates in minutes.

Can you discharge student loans in bankruptcy?

In rare circumstances, you might be able to get rid of your student loans through bankruptcy. To do so, you’ll need to declare Chapter 7 or Chapter 13 bankruptcy and prove that paying off your loans would lead to an undue financial hardship for you and your dependents. 

Your case will then go to bankruptcy court. Since there’s no universal definition of undue hardship, discharging student loan debt in bankruptcy is easier said than done. 

If you’re thinking about filing for bankruptcy and wondering whether you may be able to discharge your student loans, consider speaking to a bankruptcy attorney. They can inform you whether it’s even possible in your unique situation. And keep in mind that bankruptcy adversely affects your credit for years, so you should explore other options first before resorting to filing for bankruptcy.