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What Happens When You Stop Paying Student Loans?

Raise your hands and say “help, I’ve fallen under an insurmountable pile of student loans and I can’t get up” if you’re currently struggling with student loan debt.

Statistically speaking, about 70% of you recent grads just raised your hands. More than 40% of you loan-havers did so enthusiastically, because you’ve fallen behind on your payments.

Around 7-8 million of you are in a situation so severe, you’ve defaulted. You’ll find out later in this article what that means for your credit.

A handful of you have gone so far as to relocate abroad to avoid debt collectors.

Chances are your fantasies are mostly consumed not by vacationing in far-off destinations or getting saucy with the cute neighbor, but by cathartic dreams of running away and never paying a student loan bill again.

So, what if you did?

What if tomorrow you just woke up and decided to stop putting money toward paying off the $1.2 trillion in collective student loan debt we hold as a nation?

Here’s exactly what would happen.

Fleeing the Country to Avoid Student Debt

Exile is usually reserved for people avoiding punishment for crimes far more violent, but student loan debt has gotten so dire that some young Americans are actually going Pablo Escobar and hiding out in foreign countries to avoid making payments.

Here’s the thing: debt collectors can follow you across all 50 states, but they hit a brick wall as soon as they try to chase you abroad. The confines of our laws are, well, our borders.

VICE Magazine recently did a spotlight on a number of these youngsters who have permanently relocated to Europe and stopped paying their student loans.

A student loan expert and board member of the Journal of Student Financial Aid tells VICE, “The federal government doesn’t really have strong tools for collecting debt from people who move overseas. In theory, you could live the rest of your life in another country.”

In practice, you’d have to do exactly that.

One young woman, now living in Berlin, tells VICE, “Debt collectors haven’t badgered me in Berlin. They haven’t found me in Germany. But when I go home, my phone rings non-stop. I always think it’s an old friend trying to hang out with me, but it’s really Sallie Mae. It rings like every hour.”

As soon as you return to the United States, you’re slapped in the face not only with your student debt, but all of the interest, fines, and fees that have accrued since you fled, even if you don’t come back for another 40 years.

If you had family co-sign your loans and they’re still in the States, they’ll be responsible for your negligence. They could see their credit take an insurmountable hit or their possessions seized.

Some, apparently, are willing to take the risk. One young man with over $160,000 in student debt told VICE, “To be honest, I just don’t see myself living in America again – for reasons outside of student debt. My parents are moving back to El Salvador, where they’re from, and then I’ll have no ties to America. I don’t need to care about going back there.”

For most, leaving the U.S. for the rest of their lives is probably not the answer.

Deferring and Forbearing Your Student Loans

If you plan on staying in the United States, debt collectors will literally follow you to your grave. And when it comes to student loans, the federal government has incredible collection powers.

One woman, 58-years old, was recently taken to court regarding just over $3,000 in student loan debt from 30 years ago. They are now garnishing her wages.

There are two options that would allow you to stop paying your student loans temporarily, almost without consequence. These are deferment and forbearance.

But you have to apply for them.

If you are currently in school, unemployed, experiencing severe economic hardship, or in active duty, you can apply for your loan to go into deferment. This is basically a (limited!) time period in which the government allows you to hold off on repaying your loans until you are more capable. Interest may or may not be accrued during this time, depending on the type of loan.

If you don’t qualify for deferment, you may be able to get your loan provider to grant you forbearance. Under these terms, you can sometimes stop paying your loans for up to 12 months, but interest will continue to accrue.

Many students do this immediately upon graduating from college, due to either unemployment or low-paying entry-level jobs.

However, if you don’t qualify, ceasing to pay your loans will trigger some more extreme consequences.

What Happens When You Simply Stop Paying Your Student Loans: Delinquency and Default

The day that you miss your first payment, you will be considered delinquent. After 15 days, you will start receiving written notices. After 90 days, your delinquency will be reported to the major credit bureaus.

This will show up pretty quickly on your credit report. You’ll have difficulty getting approved for credit cards, other loans, and even finding rental properties that will accept you after this, but it will recover eventually.

After nine months of not making payments, or 270 days, you will officially be in default. This means that your lender has sent you to a collections agency, and your entire loan balance becomes due. Various collection and late fees will add up, and any future payments will first go toward paying these off.

Here’s the short list of what the federal government can do to make you pay:

  • They can garnish your wages, up to 15% of your disposable income, often forcing you to pay more than you would have been paying.
  • They can take your tax refund.
  • They can take your federal benefits, which include social security. This means that the consequences of defaulting can follow you into retirement.
  • They can and will declare you ineligible for future federal financial student aid, deferment or forbearance, and federal loan forgiveness programs.
  • They can sue you.
  • They can collect your assets, such as bank accounts and property.
  • They can’t arrest you.

Notice the amount of cans versus the one can’t. Once the federal government gets involved, you know what’s within their legal power? Well, just about everything short of showing up at your doorstep and arresting you.
Of course, this will also have a devastating impact on your credit report as payment history is the single most important factor in developing credit.

And unlike bankruptcy, there’s no clean slate. Defaulting on your student loans stays with you until you start making payments again. Even then, it will take years of on-time payments and credit rebuilding to get yourself back to a decent score.

So, as tempting as it might be to give into your fantasizes of federal loan delinquency and default, it’s not a wise decision. Instead, check out our advice on what to do when you can’t pay your student loans.

Did you stop paying your student loans? What happened?

About the author

Elizabeth Aldrich

Elizabeth is a freelance writer and “digital nomad” specializing in small business, entrepreneurship, career advice, real estate, travel, arts, and culture. She’s written for outlets as varied as Rawckus Music and Arts Magazine, Itcher Entertainment, Sweden Tips, Houzz, Hometalk, JobHero, Tico Times, and Eugene Weekly. Thanks to a three-year stint in a travel job, a knack for mining great deals, and credit card churning, she has not paid for a single flight since 2012, despite her constant travels. You can find her on Twitter @LizzieAldrich or her website,

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