What Happens if You Don't Pay Student Loans

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Student loan debt is a huge problem for an increasing number of Americans. At the end of 2016, more than 4.2 million people had defaulted on their federal student loans, and over 1 million of those defaults occurred in 2016 alone. It's clear that an increasing number of people are finding it impossible to keep up with their student loan payments, but defaulting can have severe real-life consequences. These people will find it harder to buy a home, save for retirement or even get a job, because of the way the loan process treats those behind on their payments.

Is Your Family Responsible for Your Student Loans?

If a student dies, her family will not be responsible for her federal student loan debt. Family members will need to submit a copy of the student's death certificate to the company servicing the loan.

The circumstances are different for private loans. Private lenders have their own rules about discharging debt, and family members can still be liable for any unpaid student loan debt, even after death. If the family members co-sign for the student loan, they can still be liable even in the event of a death discharge.

In a community property state, if a student takes out a private loan while married, the surviving spouse will still be responsible for the entire unpaid loan.

Can You Declare Bankruptcy Because of Student Loans?

It is possible to remove student loan debt due to bankruptcy, but only in a small number of cases with very particular circumstances. The first step is to file an action known as an adversary proceeding. This proceeding asks the bankruptcy court to find that paying off your student loan debt would pose undue hardships on you and your dependents. The court doesn't have a designated list of items it looks for in determining hardship, but some of the things they may look at are:

  • Evidence that the hardship will continue for a significant period of time, mainly for most of the loan repayment period
  • The fact that repaying the loan would take so much income that the petitioner and family couldn't maintain a minimal standard of living
  • Evidence that the petitioner has made a good faith effort to repay the loan before filing for bankruptcy

If the court does determine that payment would cause undue hardship, it can order one of three different results. It may fully discharge the loan, it may discharge part of the loan and leave the rest for the petitioner to repay or it may require the petitioner to repay the entire loan but under different terms, such as under a lower interest rate.

Will Student Loan Debtors Garnish my Wages?

If a person defaults on his student loan, the entire amount of the loan is immediately due in a process called acceleration. If the person doesn't make arrangements for repayment with the entity that holds his student loan, the loan holder can place the entire debt with a collection agency.

The first step of a collection agency will be an offer to enter a voluntary repayment agreement. If the person doesn't enter the agreement, or if he does and later defaults on these payments, the collection agency will take steps to begin garnishing his wages.

Read More: How Does Student Loan Discharge Affect Credit?


  • If you default on your federal student loans, the government will send your case to a collection agency. If you don't pay this agency, it will garnish your paycheck.