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What Happens If You Never Pay Off Your Student Loans?

Updated: Jul 28

Student loans can be a significant burden on anyone's financial health. And while most borrowers aim to pay off their loans as quickly as possible, some find themselves in a position where they can no longer make payments. In this article, we will explore what happens if you never pay off your student loans and the long-term consequences that come with it.

First and foremost, it's essential to understand that defaulting on your student loans can have serious financial repercussions. When you default on your student loans, your credit score takes a significant hit. According to the Consumer Financial Protection Bureau (CFPB), missing one payment can cause a drop of up to 110 points in your credit score. This drop can make it challenging to get approved for other types of credit, such as credit cards or car loans, in the future.

Furthermore, if you have federal student loans, the government can take a range of actions to collect the debt. The government can garnish your wages, which means they can legally take a portion of your paycheck each month to pay off the debt. According to the Department of Education, they can garnish up to 15% of your disposable income without a court order.

In addition to wage garnishment, the government can also offset your tax refund, seize your bank account, and take legal action against you. This legal action can result in court-ordered wage garnishment or the seizure of other assets, such as your car or home.

Private lenders can also take legal action against you if you default on your loans. Depending on the lender, they may be able to garnish your wages or take legal action against you to recover the debt.

Aside from the financial consequences, defaulting on your student loans can also have long-term impacts on your future. If you plan to return to school, for example, you may not be eligible for federal student aid. You may also find it challenging to rent an apartment or get a job that requires a credit check, as some employers check credit reports as part of their hiring process.

Defaulting on your student loans can have severe and long-lasting consequences. If you find yourself struggling to make payments, it's essential to reach out to your lender or loan servicer and explore your options. There are several options available, such as income-driven repayment plans, deferment, or forbearance, that can help make your payments more manageable. Ignoring your student loan debt will only make the problem worse, so it's crucial to take action as soon as possible.

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