At a Glance

What do you do when you can’t pay student loans? There are several options available to you. Read the article below to explore them.

What is a student loan?

According to data collected by U.S. News, the average cost of going to a public college in 2021-2022 was $10,388. A private college education averages $38,185. Paying that out in cash is impossible for most Americans. That’s where student loans come in. A student loan is an installment loan taken out for the specific purpose of paying that tuition.

Why you should avoid student loan default?

A student loan is a contract between the borrower and the lender. The borrower’s part of that contract is to make monthly payments on time and in full until the complete balance of the loan is paid off. Failing to fulfill that obligation will lead to a loan default that comes with some serious consequences. Those could include one or more of the following:

  • Late fees
  • Compounded interest payments
  • Wage or social security garnishment
  • Withheld tax refunds
  • Credit score reductions

Only government lenders can seize social security payments or tax refunds. Private lenders can do wage garnishments, but they need to take you to court and secure a judgement against you before that action can be taken. The negative effect on your credit report for a student loan default will last seven years, keeping your credit score down until it drops off.

What to do if your student loans go into default?

With federal student loans, the borrower goes into default after they fall behind by 270 days. Private student loans default when they’re 120 days past due. Once either of those have been triggered, much of the damage is already done, but there are some actions you can take to make sure you fix the mistake. Those include repayment plans and debt consolidation.

Related: Personal Loans for Debt Consolidation

What happens if you never pay your student loans?

Obviously, it’s not recommended that you “never” pay your student loans. There are significant consequences to that, some short-term and others long-term.

The short-term consequences

  • Late Fees and additional interest payments: Not all lenders charge late fees but being late on payments will result in additional interest payments becoming due.
  • Withheld tax refunds: Only federal lenders can withhold tax refunds. Defaulting on a student loan puts you at risk of them contacting the IRS and stopping your refund.
  • Wage garnishment: This can only be done if the lender takes the borrower to court and secures a judgment against them. The garnishment will follow the judgment.

The long-term consequences

  • Default: After 120 days in arrears for private student loans and 270 days in arrears for federal student loans, the loan will go into default.
  • Future loan eligibility: Defaulting on a student loan could make the borrower ineligible for future credit, including loans, mortgages, and credit cards.
  • Lawsuits: A private lender can sue you for failing to pay back a student loan. This can lead to a judgement, wage garnishment, or seizure of assets.

What should you do if you’re having trouble making the payment?

If you’re having trouble making your student loan payments, act before they go into default. The best ways to do that are student loan repayment plans or student loan refinancing. For your convenience, we’ve included sections on both below:

Student loan repayment plans

  • Income-driven repayment plan: Federal lenders offer income-driven repayment plans where the amount of your monthly payments is based on your income.
  • Public service loan forgiveness: For those who are on an income-driven federal loan repayment program and go into the public sector after graduation, there are loan forgiveness plans where the remainder of the debt will be forgiven after ten years.
  • Debt snowball or debt avalanche: These are debt repayment plans. Debt snowball was developed by Dave Ramsey. It advocates making extra payments on debt balances, beginning with the smallest and then moving to the largest. Debt avalanche is the same process, but the target is interest rates, not balances, from high to low.

Student loan refinancing

  • Student loan settlement: Settling a loan is getting the lender to agree to a lump sum payment for less than the total amount due. This may be possible if you’re experiencing a financial hardship and can prove your inability to pay the full balance due.
  • Teacher loan forgiveness: Teachers who work in low-income schools for five years may be eligible for up to $17,500 in student loan forgiveness.
  • Closed school discharge: This is available to students when a school closes while they are still enrolled or soon after they graduate.
  • Total and permanent disability discharge: Student loans may be forgiven in the event of a total and permanent disability. Contact your lender for more info on this.

How to manage student loan payments?

The best way to manage student loan payments and avoid late payments or defaults is to put them on autopay and make sure you have enough money in the bank to cover them each month. If you’re struggling, examine your budget and make some cuts wherever possible. If all else fails, inquire into more affordable repayment plans or refinancing.


Student loans are rarely discharged during bankruptcy. The exception is when an attorney can prove an “undue hardship” during the bankruptcy proceedings.

This is a question only the President and Congress can answer. There are loan forgiveness programs, but blanket loan forgiveness needs to come from the White House. Even then, it’s only going to be for federal student loans, not private loans.

The best way to handle student loan debt if you’re struggling to make payments is to apply for a repayment plan or refinance the loans.

Private lenders can sue you if you fail to pay off your student loans. That lawsuit could lead to a judgment against you, wage garnishment, and possible asset seizures.

Defaulted student loans will drop off your credit report in seven years.