What Happens If You Never Pay Off Your Student Loans?

by Luke Homen

Student loans can feel like a never-ending burden. If you’re struggling to make payments, you might wonder—what happens if you just don’t pay? Unfortunately, ignoring your student loan debt doesn’t make it go away. In fact, it can lead to serious financial and legal consequences, including wage garnishment, tax refund interception, and damaged credit.

If you’re in a tough spot, it’s important to understand what can happen and what options you have. 

If you’re struggling with student loan debt and facing wage garnishment or other collection actions—you’re not alone. At Convenient Bankruptcy, our experienced Oklahoma student loan attorneys understand how overwhelming this situation can be. We’ve helped countless individuals fight back against garnishment, negotiate better repayment terms, and explore legal options for relief. Let us help you regain control of your financial future.

The Consequences of Not Paying Your Student Loans

If you don’t pay your student loans, the impact depends on the type of loan you have: federal or private. Federal loans have strict rules for repayment, while private loans depend on the lender’s policies. Regardless of the type, both can lead to financial hardship if left unpaid.

1. Late Fees and Interest Pile Up

The first consequence of missing a payment is late fees. Most student loan servicers charge a penalty if you don’t pay on time. On top of that, interest continues to accumulate, making your balance grow even larger.

For federal student loans, you are considered delinquent the day after you miss a payment. If your payment is more than 90 days late, the lender reports it to the credit bureaus, which can hurt your credit score.

2. Defaulting on Your Loan

After 270 days (about nine months) of non-payment, federal student loans go into default. Private loans have different timelines, but many go into default after just 90 to 120 days of missed payments.

Defaulting means:

• The entire loan balance becomes due immediately (called “acceleration”).
• You lose access to federal repayment plans and deferment options.
• Your credit score takes a major hit, making it harder to get loans, rent an apartment, or even find a job.

3. Wage Garnishment: Your Paycheck Could Shrink

If you ignore your federal student loan debt long enough, the government has the power to garnish your wages. This means they can take a portion of your paycheck before you even see it.

Unlike private lenders, the U.S. Department of Education doesn’t need to take you to court to do this. They can automatically deduct up to 15% of your disposable income without your consent.

For private student loans, lenders must sue you first and get a court order before garnishing your wages. If they win the case, they can take a portion of your income, just like the government.

4. Tax Refund and Social Security Interception

Federal student loans also allow the government to intercept your tax refund through the Treasury Offset Program. This means that if you expect a tax refund, it could be taken to pay off your overdue loans.

If you’re older and still have unpaid student debt, the government can even garnish your Social Security benefits. This is rare, but it happens—especially to borrowers who take out loans later in life.

5. Lawsuits and Bank Account Seizures

Private lenders don’t have the same automatic collection powers as the federal government, but they can sue you. If a lender takes you to court and wins, they may be able to:

• Garnish your wages
• Place a lien on your home
• Freeze your bank account and take money directly from it

Ignoring these lawsuits won’t make them go away. If you fail to show up in court, the lender automatically wins, and collection efforts can start immediately.

6. Long-Term Credit Damage

Defaulting on a student loan stays on your credit report for seven years. This can make it much harder to get a mortgage or a car loan, rent an apartment, and qualify for credit cards. 

Even if your loan is eventually paid off, the damage to your credit can linger for years, affecting your financial future.

Can Student Loans Be Forgiven or Discharged?

You might have heard about student loan forgiveness programs, but not everyone qualifies. Programs like Public Service Loan Forgiveness (PSLF) require 10 years of consistent payments while working for a qualifying employer, such as a nonprofit or government agency.

For borrowers struggling financially, there are also income-driven repayment plans (IDRs) that can lower monthly payments and even forgive the remaining balance after 20-25 years.

Can You Get Rid of Student Loans in Bankruptcy?

You can get rid of student loans through bankruptcy; however, you must prove “undue hardship.” This means that you cannot maintain a minimal standard of living while repaying the loans. That your financial hardship is not temporary and that you’ve made a good-faith effort to repay the loans. 

This can be a tough standard to meet, but if you’re struggling, it’s worth talking to a bankruptcy attorney to explore your options. An experienced bankruptcy lawyer can guide you through this process and determine your best options. 

Don’t Ignore Your Student Loans; Call Us Today

Ignoring student loans can lead to serious consequences—wage garnishment, tax refund interception, lawsuits, and long-term credit damage. While student loans can be overwhelming, there are options to help manage your payments and avoid default.

If you’re drowning in debt and don’t know where to turn, Convenient Bankruptcy can help you explore your legal options. Our Oklahoma bankruptcy law firm understands how stressful financial struggles can be, and we’re here to guide you through the process.

Call us today at 405-639-2099 or submit a contact form. Let’s find the best solution for your financial future.