What Happens If You Don't Pay Your Student Loans?

In most respects, defaulting on a student loan has exactly the same consequences as failing to pay off a credit card. However, in one key respect it can be much worse. Most student loans are guaranteed by the federal government, and the feds have powers about which debt collectors can only dream. It probably won’t be as bad as armed marshals at your door, but it could be very unpleasant.

When your loan payment is 90 days overdue, it is officially "delinquent." That fact is reported to all three major credit bureaus. Your credit rating will take a hit. When your payment is 270 days late, it is officially "in default." The financial institution to which you owe the money refers your account to a collection agency. It may be years down the road before the federal government gets involved, but when it does, its powers are considerable. It can seize your tax refund and apply it to your outstanding debt. It can also garnish your paycheck, meaning it will contact your employer and arrange for a portion of your salary to be sent directly to the government.

To find out what you can do to avoid these consequences, check out this article.