What Happens If You Don’t Pay Your Student Loan?

In 2020, federal student loan payments were paused and millions of Americans got a long break from paying their student loans. Many student loan borrowers used the money for those monthly loan payments for savings or to reach other financial goals. 

People in default on their student loans also got a unique form of debt relief. They got a break from collections activity and other legal and financial results of defaulting on federal student loans. 

Student loans are now coming due again. In May 2025, the Department of Education said it would restart collections on delinquent student loans. 

If you’ve fallen behind on your federal student loans, you’re far from alone. Fewer than half of American student loan borrowers are current on their loans—with more than 10 million borrowers in default. 

And they all could face consequences for defaulting on student loans. In short, your personal finances and emotional well-being could take a hit for years to come. 

But take heart—you likely still have options to get back to being current and in good standing with your student loans. Let’s explore the potential consequences—and how to get back on track.

Don’t Ignore Your Student Loans 

It might be tempting to just ignore the payments. If you’ve gone several years without paying your student loans, that debt might not feel real anymore. 

But the debt is still real. And if you’re in default on federal student loans, the federal government will start trying to collect money from you if it hasn’t already. And that means you could be facing serious consequences. 

Here are a few problems you could encounter if you’re in default on student loans. 

More interest

When your federal student loan goes into default, the full amount of the loan becomes due immediately—and you don’t get a break on the interest. Interest keeps accruing, causing your debt to keep getting bigger. 

Ineligible for financial aid 

If you have a student loan in default, you are no longer allowed to receive other federal student financial aid—including grants and loans. This could make it unaffordable to go back to school or finish a degree. 

Negative credit reporting 

Defaulting on your student loans causes a negative event to be reported to credit bureaus. Student loan defaults stay on your credit report for up to seven years. Just like a home foreclosure, bankruptcy, or other negative credit event, defaulting on student loans could hurt your ability to get credit in the future. This means not paying your student loans could raise your borrowing costs for a long time. 

Loss of professional license 

Some states have older laws on the books that could suspend your professional licenses (like a teaching license or law license) if you have federal student loans in default. In practice, these laws are far less common than they used to be, and many states are in the process of revoking them altogether. Few states seem interested in taking away people’s career credentials because of student loans. 

On the off-chance you live in a state with these laws, losing your job isn’t a risk you’d want to take. 

Collection fees 

When your federal student loans are in default, any payments you make will be used to pay collection fees. This drives up the cost of your loan even more—this is on top of the additional interest—and makes it take longer to pay off. 

Treasury offsets (a.k.a. garnishment) 

You may eagerly anticipate your annual tax refund or rely on certain government benefits. If you’ve defaulted on your student loans, however, the Treasury Department could seize, or offset, your student loan for repayment by taking some or all of the following:  

• Federal tax refund

• State tax refund

• Up to 15% of Social Security benefits, including disability  

• Other federal payments  

Wage garnishment for student loans

Your wages could also be at risk of garnishment. If you have federal student loans, garnishment typically begins after a default—when a borrower is at least 270 days (or nine months) past due on payments.

Wage garnishment for student loans can take up to 15% of your disposable income, or what’s left after you’ve paid  taxes and deductions. That means if your take home pay is about $3,000 per month, the federal government could take $450 of that amount.  

What to Do If You Can’t Pay Your Student Loan 

If your student loan is in default and your payments are unaffordable, the best thing you can do is sort through your options and make a plan. Assume that you need to start making payments again, even if they're for a small amount. And know that the federal government will work with you to figure out a path forward. 

Go to StudentAid.gov and look for your options to rehabilitate your loan, including:

• Affordable payments in an amount your lender agrees to 

• New repayment plan you can afford, based on your income 

• Loan consolidation 

You’ve got ways to get back in good standing, repair your credit, and avoid serious consequences like garnishing your wages.