According to Nolo, a leading publisher of books on legal topics, the following things can happen if you do not make student loan payments:
1. Tax Refund Interception: The IRS can intercept your tax refund to collect unpaid student loan payments. Each year, hundreds of millions of dollars are collected this way.
2. Paycheck Garnishment: The government can take a limited portion of the wages of a student loan debtor who is in default.
3. Federal Benefit Interception: Federal benefit payments (including Social Security retirement and disability benefits) can be taken to reimburse unpaid loans.
4. Lawsuit and Court Judgment: The government and private lenders can sue to collect defaulted loans without any time limit.
If you think you will be late with student loan payments, contact the lender beforehand to work out a mutually agreeable alternative payment arrangement. If you ignore your student loan debt, one or more of the actions described above may occur.
We would like your feedback on this Personal Finance Frequently Asked Question.
