What happens if you never pay off your student loan?


If you never pay off your student loans, your credit score will drop, it will be more difficult for you to get future loans, and your lenders may even sue you. The short and long term consequences can be difficult to recover from, which is why it is important to make payments on your loans or seek help if you expect to miss payments. Here’s what to know if you are nearing a student loan default.

What happens if you don’t pay off your student loans?

Failure to repay a student loan has both short term and long term consequences, depending on where you get the repayment.

Short term consequences

If you are even one day overdue on your student loan, you will be immediately considered overdue. Here’s what can happen if you miss several payments:

  • Late fees. A late payment that you end up making, but not on time, can result in a late payment penalty. This amount varies depending on the lender, and not all of them set this fee, but very often you will see either a flat fee or a percentage of your missed payment.
  • Withholding tax refund. If you are not paying off your federal student loans, the government could hold refund until you are aware of the payments.
  • Withholding wages. If you are several months late on your student loan, your lender may contact your workplace and raise your salary. He can do this until you pay off some of your loans and get a good reputation.

Long term consequences

Overdue loans take effect immediately after one missed payment, but may not be reported to major credit bureaus for 90 days. Here’s what happens if you don’t pay your student loans for longer.

  • Default. After several months of missed payments, your loan will go into Default… The exact timing and consequences of a default will vary from lender to lender, but in some cases, the entire student loan balance is due immediately.
  • Forfeited the right to receive future assistance. If you are currently in default, you could lose any future student aid, including scholarships, grants, and federal student loans. Unfulfilled loans on your credit report can also make it difficult to buy a house, buy a car, or get a credit card.
  • Downgrade of the credit rating. The longer you stay off your student loans, the more your credit score will drop.
  • Potential lawsuits. Your original lender may have sold your loan to a debt collection agency who may call you and send you letters in an attempt to collect the debt. To reduce wages, creditors will have to go to court. You can be sued if you don’t pay off your loans.

How to get rid of student loans

If you are struggling to pay off your student loans, there are various repayment plans that keep your loans up to date and do not turn around for the bank. Consider all possible options before choosing the one that best suits your needs.

Income-driven repayment plan

If you are struggling to afford to pay off your student loans, you can register all of your federal loans with income-driven repayment plan… There are several different types depending on your needs, but they all have similar methods. You will make monthly payments based on your discretionary income and family size. After 20 or 25 years, depending on the plan, your loan balance is forgiven. You will need to update your information every year to ensure that your payments accurately reflect your financial situation.

Public Service Loan Forgiveness (PSLF)

PSLF is available to federal student loan borrowers who are embarking on a career in government service. After 10 years of making payments to an income-driven repayment plan and working for a suitable employer, the remaining debt will be forgiven.

Debt Snowball or Debt Avalanche

If you have many different student loans and a mix of federal and private student loans, you may want to try a different approach. Both the snowball method and the avalanche method allow you to list every debt, including the total amount, monthly amount, interest rate, and maturity date.

In both cases, you will be making the minimum payments on all your loans. For snowball method, you put each extra dollar into debt with the smallest amount. For debt avalanche method, you will invest every extra dollar in debt with the highest interest rate. You will do this until each debt is paid off, moving on to the next highest debt (or the debt with the next highest interest rate), until all of your student loans are paid off in full.


If you have high interest rates or a lot of different student loans, you may want to consider refinancing… This is when you take out a new loan to pay off all of your current student loans. You will receive the new repayment terms and the new interest rate, and then make one monthly payment against the refinanced loan until it is paid in full. You can only refinance your loans with private lenders, so refinancing your federal loans means that you will lose certain protections such as abstinence or the ability to sign up for an income-driven repayment plan. But if you have excellent credit and can get a lower interest rate than what you are paying now, it will be worth it.

Student loan settlement

Student loan settlement it is when you agree to pay off student loans for less than you owe. If you are falling that far behind on your student loans and your credit score has already suffered, it might seem tempting, although you will need a lump sum to pay off your outstanding settled balance. Lenders are not required to settle, and this option may not work, but some lenders may consider it in order to collect at least some of your outstanding amount.

Will student loans be forgiven?

While President Biden mentioned student loan forgiveness during his campaign, nothing was formalized during the first few months of his presidency, so it is imperative keep paying your loans… Even if some form of forgiveness does come to you, don’t wait for it; making payments on your loans ensures that you do not end up in default. And remember, federal student loan borrowers are not required to make payments until September 30th, so you have a respite if you are currently struggling.

The essence

Failure to repay a student loan can have disastrous consequences for your finances, your credit history and your future borrowings, so do your best to stay up to date on your loans. If you’re struggling, find a repayment plan that works for you, such as an income-driven repayment plan, or refinance your loans. Failure to pay off your student loan will hurt you for years to come, so the best course of action should be one that gets you back on track.

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