As a college graduate, you may find that juggling all of your financial responsibilities is a challenge. Perhaps for the first time, you’re solely responsible for paying rent, making your car payments, and paying off your student loans.
With so many competing demands on your budget, it may be tempting to put off your student loan payments. According to a College Ave survey, 59% of students said they are stressed about their student loan debt, and 62% worry that their monthly payments may be larger than they anticipated.
What Happens if You Don’t Pay Your Student Loans?
When it comes to missing your student loan payments, the consequences will depend on the type of loan you have and how late your payment is. Below is what you can expect to happen if you miss your payments with federal student loans and private student loans.
What Happens if You Don’t Pay Your Federal Student Loans?
- During the grace period: With undergraduate federal student loans, you don’t have to make payments while you’re in school or during the grace period. The grace period ends six months after you graduate or leave school. After that time, you will have to make monthly payments against the principal and interest.
- If the payment is one day late: Your account is delinquent, and the loan servicer will send you reminders.
- If the payment is 30 days (about 1 month) late: The loan servicer may charge you a late fee. Federal loan late fees are 6% of the late payment amount.
- If the payment is 90 days (about 3 months) late: The loan servicer can report the late payments to the three major credit bureaus: Experian, Equifax and TransUnion. This can damage your credit score.
- If the payment is 270 days (about 9 months) late: Accounts are entered into default which means the loan servicer can take severe measures, including reporting the default to the credit bureaus, sending the account to a collections agency, garnishing your wages and even taking your tax refund.
If you borrowed Federal Unsubsidized Student Loans, interest will accrue during your in-school period through your student loan grace period, unless you chose to make payments during that time.
For the Federal Perkins Loan Program, contact the school where you received the loan for details. If you know that your Perkins Loan has been assigned to the U.S. Department of Education, contact the ECSI Federal Perkins Loan Servicer. Servicers for Federal Perkins Loans can vary from other federal student loans.
Recent Changes to Federal Loan Collections
After a multi-year pause that began in March 2020, the U.S. Department of Education has officially resumed collections on defaulted federal student loans as of May 5, 2025.
What Borrowers Need to Know:
- The Treasury Offset Program is restarting, meaning the government can now withhold tax refunds and federal benefits (like Social Security) to repay defaulted federal student loans.
- Wage garnishment will resume later this summer. Borrowers in default could have up to 15% of their disposable income automatically withheld from their paychecks without a court order.
- The Department of Education is contacting affected borrowers directly through email and other communication to help them avoid these consequences. Borrowers are encouraged to:
- Enroll in income-driven repayment (IDR) plans
- Apply for loan rehabilitation
- Contact the Default Resolution Group to discuss options
What Happens if You Don’t Pay Your Private Student Loans
With private student loans, the consequences of not paying student loans can occur much faster:
- Immediately after graduation or leaving school: Most private student loan companies offer in-school deferments and grace periods. Depending on the repayment terms of your loan agreement, you may have to make payments while you’re a student or immediately after graduating. Check with your lender and/or servicer for specific details on your loan.
- If a payment is late: You may be reported as delinquent to the credit bureaus, negatively affecting your credit score. Your lender will likely reach out to you to attempt to secure late payments and get you paying on time.
- As an account becomes severely delinquent: Precise timing policy may differ by lender. The account may be placed in default. At that point, the entire loan balance becomes due, and the lender may attempt to collect the balance in full or sell the loan to a Collections company. Defaults are reported to the credit bureaus and will affect your credit score for seven years.
What Are the Consequences of Not Paying Your Student Loans?
The consequences of not paying student loans can have a big impact on your financial well-being, so it’s important to stay on top of your payments or seek assistance when you need it. Federal student loan servicers and private lenders can take measures to try and collect the owed amount. Here are 10 potential consequences you could face for defaulting on your student loan:
- 1. Damage to credit score: When you default on your loans, the lender will report the default to the credit bureaus. Your payment history is the biggest factor determining your score, so a loan default can drop your score. For example, a payment that is 90 days late could cause your score to drop by as many as 150 points.
- 2. Long-lasting impact on credit report: It can take a long time to recover from defaulting on your loans. Student loan defaults will remain on your credit report for seven years, making it difficult to qualify for credit cards, mortgages and other forms of credit.
- 3. Loan acceleration: Once your loan enters default, the lender can accelerate your loan. That means the total of the outstanding principal, interest and late fees is due immediately.
- 4. Wage garnishment: With federal student loans, your loan servicer can garnish your wages, taking up to 15% of your paychecks once you enter default; without a court order. In the case of private loans, the lender must take a legal action before it can garnish your wages. The maximum percentage private lenders can garnish is 25% of your wages.
- 5. Treasury offset: Treasury offset is a measure only federal loan servicers can use. With treasury offset, federal loan servicers can withhold your federal tax refund, social security check or other government benefits to repay the amount owed.
- 6. Loss of eligibility for other aid: As long as your account is in default, you are ineligible for other forms of federal financial aid, including grants.
- 7. Inability to access transcripts: When you default on your loans, your college can refuse to issue you your official transcripts, making it difficult to transfer to another school or get proof of your education.
- 8. Debt collections: Both federal and private student loan companies can sell your account to collections agencies. Debt collectors can pursue collection aggressively, and you may be responsible for collection fees and other costs.
- 9. Loss of licenses: In some states, defaulting on your student loans can cause you to lose your professional license or even your driver’s license.
- 10. Lien on property: If a lender sues you and wins the lawsuit, they can place a lien on your property, such as your house. Although lenders will rarely force a sale of a home, they can wait and collect on the lien when you sell your home.
What to Do If You Can’t Afford Your Student Loan Payments
If you realize you cannot afford your payments – but haven’t entered into default yet – take these measures right away:
Contact Your Lender Right Away
Whether you have private or federal student loans, you can avoid a lot of problems by contacting your lender as soon as you realize you won’t be able to make your scheduled payment. By working with the lender early, you may be eligible for temporary payment deferments, alternative payment plans or other options that allow you to prevent defaulting on your debt.
Enter Forbearance or Deferment
With federal student loans, you may be eligible for a loan deferment or forbearance if you’re experiencing a financial emergency, such as getting laid off at work. With federal forbearance or deferment, you can postpone your payments for a period of time, giving you time to financially recover. Some private student loan companies have their own financial hardship policies, so talk to your lender to see what options are available.
Enroll in an Alternative Payment Plan
If you have federal student loans, you may be eligible for an Income-Driven-Repayment (IDR) plan. With this option, your payments are based on a percentage of your discretionary income and a longer repayment term. Depending on your circumstances, you could qualify for a payment as low as $5.
As an added benefit, loans repaid under IDR plans can be discharged once the repayment term ends. If you still have a loan balance after 20 or 25 years the loan term varies by IDR plan the government will discharge the remainder, making you debt-free overnight.
Consider Refinancing Your Debt
If you have private student loans and aren’t eligible for a financial hardship deferment, another option is to refinance your debt. With student loan refinancing, you could potentially qualify for a lower rate or a longer loan term. Either option could give you a more affordable monthly payment. You will likely need good credit to qualify for a lower interest rate.
Important: Before refinancing federal student loans, carefully weigh the pros and cons. Refinancing federal loans converts them into private loans, and you’ll no longer be eligible for federal loan benefits like IDR plans or loan forgiveness.
How to Get Out of Student Loan Default
Once your loans are in default, it can be difficult to get out. Depending on the type of loans you have, the following options can help you get out of student loan default:
Consolidate Your Federal Loans
If you have federal student loans, you can consolidate your defaulted loans with a federal Direct Consolidation Loan. To qualify, you must do one of the following:
- Agree to enter into an IDR plan
- Make three full, consecutive, and voluntary monthly payments before you consolidate
Loan consolidation doesn’t remove the record of the default from your credit history, but your accounts will no longer be in default, and you’ll regain eligibility for federal loan benefits and additional financial aid.
Direct Consolidation will also combine your existing federal loans into one, so it will be easier to manage your payments since you will only have one loan servicer and one payment due date to manage. And Direct Consolidation loans can have loan terms as long as 30 years. While a longer term means you’ll pay more overall due to interest, the longer loan term can give you a much lower monthly payment than you have now.
Negotiate With Your Lender
If you have private student loans, your loans are likely in collections, either with your lender or an agency working on their behalf. When a collections agent attempts to collect on the outstanding loan, there is the potential for negotiation. You could enter into a payment plan, or, if you have access to a lump sum of cash, you could potentially negotiate a settlement where you pay a one-time lump sum amount to settle the debt.
Getting Back on Track With Your Student Loans
When money is tight, the risk of falling behind on your student loans can be frightening.
If you’re struggling to afford your payments, take action now to lower or postpone your payments so they’ll be easier to manage in the future, keeping your loans out of default. Explore options like income-driven repayment for federal loans or if you have private loans, consider refinancing. Refinancing could help you secure a lower interest rate, reduce your monthly payment, or adjust your loan term to better fit your budget. Learn more about how refinancing with College Ave can help make your student loan repayment more manageable.
About the Survey
The College Ave survey was conducted by Barnes & Noble College InsightsTM. The national online survey of undergraduate students who attend a 4-year college or university at one of the campuses served by Barnes & Noble College had 1,060 respondents and was fielded in February – March 2025. Last year, Barnes & Noble College Insights conducted more than 50 research studies and 100+ survey polls of students, faculty and parents that interact with one of its more than 770+ campus bookstores across the nation.
