Your loans enter default, your credit score drops, and the government can take your tax refunds

If you stop paying federal student loans, the government will eventually garnish your wages, seize your tax refunds, and sue you for the full balance plus interest and collection costs. Private student loans follow a similar path but move faster — a private lender can start collection calls within 60 days of a missed payment, and can sue you without waiting for default. Both routes damage your credit for years and make it harder to borrow money, rent an apartment, or get hired for some jobs.

The timeline and consequences depend on whether your loans are federal or private, how long you have not paid, and whether you have contacted your loan servicer. But the core fact is simple: ignoring student loans does not make them go away. The debt grows, the penalties stack, and the government has legal tools to collect that most other creditors do not have.

Key Takeaways

  • Federal loans enter default after 270 days (nine months) without payment, triggering wage garnishment, tax refund seizure, and collection costs added to your balance.
  • Private loans can be reported to credit bureaus within 60 days and sued within months, with no waiting period for default.
  • Your credit score will drop significantly, making it harder to borrow for a car, home, or credit card for years after default.
  • Contact your loan servicer before you miss a payment to discuss income-driven repayment plans, deferment, or forbearance — all of which pause or lower your payments without triggering default.
  • Even after default, you can rehabilitate federal loans by making nine on-time payments in ten months, which removes the default from your credit report.

How federal student loans move into default

Federal student loans enter default after 270 days (nine months) without a payment. Before that point, your loan is considered delinquent — behind but not yet in default. The distinction matters because delinquency is reported to credit bureaus immediately, but default triggers the government's collection powers.

Once your loan is in default, the entire remaining balance becomes due immediately. You cannot pay just the missed months and get current again — the government can demand the full amount. At that point, the Department of Education can garnish up to 15 percent of your disposable income, intercept your federal tax refunds, and offset other federal benefits like Social Security. The government can also sue you, and if it wins, can garnish your wages without a court order in the future.

Collection costs are added to your balance. These fees vary but typically run 15 to 20 percent of the amount owed. So a $20,000 loan in default can become $23,000 to $24,000 before you even start paying again.

What happens to private student loans

Private lenders move faster and have fewer restrictions than the federal government. Most private loans are reported to credit bureaus as delinquent after 60 days without payment — not nine months. Your credit score begins dropping immediately, and the lender can start collection calls right away.

Private lenders can sue you without waiting for a formal default period. Once they win a judgment, they can garnish your wages in most states. Unlike federal loans, private lenders cannot seize tax refunds or offset federal benefits, but they can pursue wage garnishment, bank account levies, and liens against your property depending on your state's laws.

Private loans also accrue interest and late fees while you are not paying. If your loan has a variable interest rate, the rate may increase after default. The total amount owed grows faster than with federal loans, and there is no rehabilitation process to remove the default from your credit report — the damage stays for seven years from the date of first delinquency.

How your credit score and borrowing power are affected

A student loan default or serious delinquency will drop your credit score by 100 points or more, depending on your starting score and credit history. This affects your ability to borrow for a car, mortgage, or credit card. Lenders see default as a sign you will not repay, so they either deny you or charge you a higher interest rate to offset the risk.

The damage lasts for seven years from the date you first missed a payment. Even after seven years, the default may still appear on your credit report if the loan is not yet paid off. Employers, landlords, and some government agencies also check credit reports, so default can affect your job prospects and ability to rent an apartment.

If you are trying to buy a home, most mortgage lenders require that you bring federal student loans current before they will approve you. Some lenders will not work with you at all if you have a recent default, or will require a larger down payment and charge a higher interest rate.

Wage garnishment and tax refund seizure

The federal government can garnish up to 15 percent of your disposable income without a court order once your loan is in default. Disposable income is what remains after taxes and basic living expenses are deducted. If you earn $3,000 per month and have $1,500 in taxes and living expenses, the government can take up to $225 per month (15 percent of $1,500).

The government will also intercept your federal tax refunds. If you are owed $2,000 back from the IRS, that money goes to your loan servicer instead of to you. This continues until your loan is paid off or you enter a repayment plan. State tax refunds may also be intercepted in some states.

If you receive Social Security, federal student loan debt can offset your benefits — meaning your monthly check is reduced. This applies to both retirement and disability benefits. The offset is typically 15 percent of your monthly benefit, though there are some protections if you are receiving a low benefit amount.

Options before and after default

If you are struggling to pay, contact your loan servicer before you miss a payment. Federal loans offer income-driven repayment plans that cap your payment at 10 to 20 percent of your discretionary income — sometimes as low as $0 per month if your income is very low. These plans are not the same as default; they keep your loan in good standing and prevent credit damage.

Deferment and forbearance are temporary pauses on payments. Deferment is available if you are in school, unemployed, or facing economic hardship, and interest does not accrue on subsidized loans during deferment. Forbearance is available for almost any hardship and pauses payments for up to three years, though interest continues to accrue on all loan types.

If your loan is already in default, you can rehabilitate it by making nine on-time payments within ten months. Once you complete rehabilitation, the default is removed from your credit report — though the late payments that led to default remain. After rehabilitation, you can enroll in an income-driven plan or standard repayment. Rehabilitation is available only once per loan.

Frequently Asked Questions

Can student loans be forgiven if I do not pay them?

No. Student loans cannot be discharged through bankruptcy except in rare cases where you can prove undue hardship, which courts interpret very strictly. Ignoring the debt does not make it go away — it grows through interest and collection costs, and the government can collect through wage garnishment and tax refund seizure for the life of the debt.

What is the difference between delinquency and default?

Delinquency begins the day after you miss a payment and is reported to credit bureaus immediately. Default occurs after 270 days (nine months) without payment on federal loans and triggers the government's collection powers, including wage garnishment and tax refund seizure. Private loans may go into default much faster, sometimes within 60 to 120 days.

Will I go to jail for not paying student loans?

No. Student loan debt is a civil matter, not a criminal one, so you cannot be jailed for owing money. However, if you are ordered to appear in court and do not show up, you could face contempt charges. If a court orders you to pay and you ignore the order, that can lead to jail time — but the debt itself is not a criminal offense.

Can I get a student loan out of default?

Yes. Federal loans can be rehabilitated by making nine on-time payments within ten months, which removes the default from your credit report. You can also consolidate a defaulted federal loan into a Direct Consolidation Loan, which ends the default status immediately. Private loans cannot be rehabilitated, but you can negotiate a settlement or payment plan with the lender.

What happens if I ignore collection calls?

Ignoring collection calls does not stop the debt or the consequences. The lender or servicer will continue trying to reach you, may report the debt to credit bureaus, and will eventually sue you. Once they win a judgment, they can garnish your wages and seize your tax refunds without further court action. Answering the call and discussing your options is always better than ignoring it.