May 27, 2021

What Happens If You Don’t Pay Student Loans?


According to EducationData, approximately 43.2 million Americans owe a combined $1.71 trillion in student loan debt. The numbers are staggering, and many Americans find it challenging to make monthly payments on top of their other financial responsibilities. In fact, more than 1 million student loan borrowers default every year.

So, what happens if you don’t pay student loans? Here are some of the possible consequences and scenarios:

1. Delinquent Loan

When you fail to pay your loan 90 days after the due date, it gets tagged as delinquent. This is reported to the three major credit bureaus, which means that your credit rating will take a hit. If you have a private loan, the lender may report it to the credit bureaus as early as when you’re 30 days overdue. You may also be charged with late fees and penalties.

The status will stay this way until you can get your payments up-to-date. When your credit report shows that you have missed or late payments, it’ll have a negative effect on your finances and ability to borrow money from major financial institutions.

2. “In Default” Account

If you still fail to make payments 270 days past the due date, your loan will be officially considered as “in default.” For private loans, the account enters default 120 days past due.

The lender will do its best to get you to pay. If they send the loan to a debt collection agency, you may also be on the hook for the fees used to cover the cost of collection.

3. Long-Term Consequences of Default

Defaulting on your student loan has far-reaching consequences. Here are some of them:

  • Late fees: If you have a federal student loan, you’ll most likely be charged with late fees amounting to at most 6% of the amount that is due and unpaid. Private loans also come with late fees, but they vary depending on the specific lender.
  • Lower Credit Score: A lower credit score will make it more difficult for you to obtain credit cards and other types of loans in the future. Even if you do manage to get approved for these loans, you’ll most likely be charged higher interest rates.
  • Loss of Benefits: Federal student loans come with certain benefits including eligibility for forbearance or deferment. Once you default, you’ll lose access to these benefits. You may also have to shift to an income-driven repayment plan instead of being able to choose a repayment plan that works for your specific needs.
  • Wage Garnishment: Federal student loan lenders can garnish your wage to collect on your unpaid balance. This can reach up to 15% of your paycheck. Private lenders may also garnish up to 25% of your wages.
  • Withholding Tax Refunds: In certain cases, the government may withhold tax refunds to collect on your student loan payments.
  • Legal Action: Sometimes, the lender may go as far as suing you to collect the money that they’re owed. Private lenders are, in fact, notorious for aggressively pursuing defaulting borrowers in court.
  • Property Lien: If the government sues you in court and wins, they can place a lien on your property. A lien is essentially an encumbrance preventing you from selling or transferring ownership of the property until you can pay it off. The government can also force a sale.
  • Suspension of Driver’s and Professional License: In some states, borrowers who default on their student loans can get their driver’s and professional (e.g. nursing, teaching, electrician’s) license suspended or revoked. This creates a difficult scenario where you can’t work or travel to work, so you can’t get the money you need to pay for your debt.
  • Effects on Cosigners: If your loan has a cosigner, the lender may turn to them to collect on your debt. Defaulting will also have a negative effect on your cosigner’s credit score and finances.

Student Loan Forgiveness or Discharge

Student loans rarely ever go away. Unlike other forms of debt, student loans are rarely discharged by filing for bankruptcy. You’ll also still be required to fulfill your obligation if you fail to graduate or can’t find employment opportunities in your field.

However, there are other options to get rid of student loans without paying them off fully:

  • Teacher Loan Forgiveness: Teachers who work in low-income schools for at least five years are eligible for up to $17,500 of forgiveness.
  • Public Service Loan Forgiveness: Borrowers who are working in government offices or non-profit organizations and have made at least 120 prompt payments may qualify for forgiveness.
  • Total and Permanent Disability Discharge: This is available to borrowers who are suffering from a permanent disability.
  • Closed School Discharge: This is available to borrowers whose schools have closed while they were still enrolled or immediately after they graduate.


It’s important to find ways to make repayment more manageable. You can try looking into forbearance or deferment programs that will provide temporary relief while you're financially struggling. There are also refinancing and loan consolidation options that can reduce the amount of your monthly payments.

It’s important to research and consult with experts to determine which best suits your unique circumstances.

Use Chipper for Lower Payments

Chipper can help you find a student loan repayment plan that actually fits into your budget. You simply fill out your information and link your student loan account for us to generate your options in seconds. We help the average student loan borrower save over $300 a month off their student loan monthly payment. Lowering your monthly payment plan can game changing for your personal finance and can be done in minutes! Sign up for Chipper today to get on track with your student loans.

Use Chipper for The Best Path to Forgiveness

Finding your path to student loan forgiveness is easier than ever before. Chipper helps members find better Income-Driven Repayment (IDR) plans every day. Once enrolled in an eligible repayment plan, we can help you explore your forgiveness options and understand your path towards forgiveness. Sign up with Chipper today and get on track with your student loans.

Use Chipper for Round-Ups

Paying off your student loans doesn’t have to be a long and painful journey. Round-Ups are a way to directly pay off your loans with your everyday spending! By tracking your linked spending account(s), we will calculate the rounded up amount from each transaction in a week (IE spending $4.28 would add $0.72 to the weekly amount). We then initiate a payment towards your student loan for the weekly amount. Get chipping away on your student loans with Chipper today.

Use Chipper for Public Service Loan Forgiveness (PSLF)

The Public Service Loan Forgiveness (PSLF) program was created to provide relief to borrowers aiding the public sector. Unfortunately, 30% of applicants are denied due to incorrect paperwork. We can help! Chipper was created to solve this issue by assisting borrowers in understanding their options as well as allowing forgiveness eligible users enroll into the best forgiveness program available. Sign up for Chipper today to see your student loan forgiveness options and get the forgiveness you deserve.

Use Chipper for Teacher Loan Forgiveness (TLF)

The Teacher Loan Forgiveness (TLF) program was created to enable teachers working in Title 1 schools to receive student loan forgiveness of up to $17,500 (depending on their teaching subject). Chipper has helped teachers from all over the country qualify for TLF program and can help you get the forgiveness you deserve today. Find out if you qualify for forgiveness in minutes with our employer search tool.

Don't worry.
Be Chipper.
Get Started