Paying off student loans can get very overwhelming and burdensome. So, what happens when you don’t pay off your student loans?
The size and frequency of the payments can be a challenging task to juggle, especially during the earlier years of your career when your earnings aren’t extremely lucrative. The temptation to blow off your payments is understandable. In reality, not paying your student loans can be one of the worst financial decisions you can make.
The Difference Between “Delinquency” and “Default”:
The first day you miss a student loan payment, your loan will become delinquent, or past due. Your loan will remain delinquent until you pay the amount due, you suspend your payments, or you change your repayment plan.
If your loans continue to be delinquent for 90 days or more, your loan may go into default. Loans under the William D, Ford Federal Direct Loan Program or the Federal Family Education Loan Program will go into default if you don’t make your scheduled payment within 270 days. Please check the specifications of your lender, as each organization can differ greatly. Do not ignore your student loan payment as defaulting on your loan will have serious consequences.
Consequences of a Delinquency or Default:
Your entire loan balance, including any interests, can become due immediately.
Your credit score will suffer. As a result, your student loan default or delinquency will make getting a credit card, an apartment, or a job difficult.
You may no longer be eligible for additional financial aid.
In some states, your professional and driver’s licenses may be suspended, hindering your ability to work.
You can be subject to wage garnishment, meaning a court can issue an order to require your employer to withhold a certain amount of your paycheck to repay your debt.
Your lender can take legal action against you.
Your lender can place a lien on any property you own, meaning they will have the right to keep possession of your property until your debt is discharged.
Your tax return, Social Security, and another Federal payment could be garnished.
But What Happens if I Can’t Pay My Student Loan?
If you are having difficulty paying your student loans, contact your lender to discuss your situation. Before your loan goes into delinquency or default, other repayment methods can be arranged, such as income-driven student loan repayment. You also have the option to put your loans into forbearance or delay your payments. Finally, check if you qualify for a student loan forgiveness program.