What are the Consequences of Student Loan Non-Payment

For all people who have student loan debt, making a student loan payment on time is important for a number of reasons. There are many consequences to not paying a student loan, many students do whatever they can to keep their loans current, whether it means making payments, or making the necessary forbearance or deferment arrangements with the lender. Wondering what the consequences of student loan non payment are? They could involve: tax refund offset, litigation, wage garnishment, bad credit, and denial for military service.

Tax Refund Offset

The most common consequence of not making student loan payments on time is losing your tax refund. Every year when you file your taxes, if your student loans are in delinquent status, you risk losing the refund. While the refund will pay down your debt, you may find yourself in a sticky financial situation if you were counting on being able to use your refund money for something else. 


In some cases, you will be sued. Though not all borrowers will be, any borrower can be. What makes this situation even worse is, you may even be held responsible for the cost the lender incurs by suing you. This means you will not only have the original student loan debt, interest, penalties and late fees, but you will have the lender's legal fees, and your own, too. Avoid this at all costs. 

Wage Garnishment

Similar to the way your tax refund can be intercepted, your paycheck can be garnished to handle the debt. The amount and frequency of the garnishment will vary depending on the rate and frequency of pay, and the amount of delinquent debt. Wages may be garnished at a rate of up to 15% of any disposable income. This will be handled through your employer. 

Bad Credit

Lenders will often report payment information to the credit bureaus. This will make your score go down, making it increasingly difficult, if not impossible, to obtain financing for a vehicle or a home. There may be additional costs incurred for student loan debt sent to collections, which will also be reported on your credit report. 

Denial for Military Service

Those who do not pay their student loan debt may not be eligible to enroll in the military. While this may not be a “consequence” for some people, others who enjoy the idea of serving in the Armed Forces may find this to be a major motivator to make student loan payments on time.

Once you have defaulted on your student loans, options such as deferment, forbearance, and consolidation are no longer available. These options are valuable in the sense that they provide a way to keep student loans current and save money while you are experiencing conditions which may prohibit you from making your payments on time. If you are having problems with making student loan payments, speak to your lender or loan servicer today to make arrangements to keep your account in good standing.

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