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What Happens When You Can’t Pay Off Your Student Loans

Matthew Levy Updated: October 17, 2023 • 3 min read
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Key Points:

  • Missing student loan payments can lead to various negative consequences, including late fees, credit score damage, and eventually, loan default.

  • Default can lead to the government intercepting your federal tax refunds and garnishing your wages.

  • It's essential to understand the severe consequences of defaulting on your student loans.

Sometimes, when going through a tough financial time, you might think, “I can’t afford student loans.” And if that’s you, you are not alone. The following article will discuss what happens if you can’t pay student loans, outlining the potential issues and practical steps to take if you are delinquent on payments.

Understanding what happens when you miss a payment can provide clarity and peace of mind. 

What to Expect When You Can’t Pay Student Loans Off

When you’re missing student loan payments, it is hard to get a handle on what is coming next. Understanding the timeline of what happens when you miss a payment can provide some clarity and possibly a bit of peace of mind. 

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A Day or Two After a Missed Payment

A day or two after the due date might not seem like a big deal, but this is when the clock starts. Typically, most lenders won’t hit you with immediate repercussions, but during this time, you should take some action. Review your finances, reach out to your lender, and discuss any available options for your situation - communication is huge. 

30 Days After a Missed Payment

By this point, your payment is officially considered late, and things will start getting more serious. There can be late fees, and there’s a chance your loan servicer will report the delinquency to the credit bureaus, likely affecting your credit score negatively. You should explore alternative solutions, like deferment or forbearance, and avoid missing any further payments. 

9 Months After a Missed Payment

Nine months without payment is significant, as your student loan will now be considered to be in default. The consequences also increase - you may face legal actions, and the total balance of your loan could become due immediately. Your credit score will likely take a significant hit, which can make future financial plans more challenging. Avoid this if at all possible, and consider reaching out for financial advice or seeking support options well before then. 

See here: Student Loan Calculator 

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Implications of Defaulting on Student Loans

Defaulting on student loans is a situation you probably don’t even want to think about. However, it is important to understand the potential consequences. You need to make informed decisions and take proactive steps to try to avoid this, but here is what will likely unfold if you do default. 

Credit Score is Affected

Your credit score is your financial fingerprint, and defaulting on a student loan will make your financial life much more difficult. Loan services report defaults to credit bureaus, potentially causing your score to plummet. It can affect everything from your ability to rent an apartment, secure a mortgage, or even open up a new credit card. 

Repayment Plan Eligibility

Falling into default can also affect your eligibility for repayment plans. Options that may have been previously available to ease your loan burden, like income-driven repayment plans, may no longer be available, limiting your ability to manage your loan in a way that suits your financial situation. 

The Entire Loan Balance Becomes Due

The biggest implication of defaulting on payments is that your entire loan balance may become due immediately. This accelerates your debt load and can make a challenging financial situation even more difficult. 

Increasing Student Loan Debt

Compounding interest also affects your student loan amounts with defaulted loans. Your debt will continue to grow due to accumulating interest, late fees, and collection costs, making your debt resolution even further away. 

The IRS Can Seize Your Tax Refunds

In default, your federal tax refunds can be intercepted by the government. That means the money you may have earmarked for other essential expenses instead gets diverted to your outstanding debt. 

Your Wages Will Be Garnished

In addition to the tax refunds, defaulting on your student loan can lead to wage garnishment. A portion of your paycheck could be withheld to cover your unpaid debt, significantly impacting your day-to-day living expenses and financial planning. 


Not being able to meet student loan payments is a complex scenario and can be extremely distressing. Recognizing the impacts, from initial late fees to potential credit score damage and wage garnishment, is important. Understanding the implications can help you be more proactive and seek alternatives to mitigate the consequences. 



Will it hurt my credit score if I can’t pay my student loans?

Yes, failing to pay your student loans on time can negatively impact your credit score. Late or missed payments typically lead to a drop in your score, making future financial planning more challenging.

Why can’t I pay my student loans with a credit card?

Most loan servicers don’t accept credit cards due to processing fees, and they also discourage accruing high-interest credit card debt to pay off educational loans. Some third-party services may facilitate payments for a fee, but ensure you understand all of the financial implications.

Is there any way to lower student loan payments?

Yes, various options may be available, like income-driven repayment plans, refinancing, or potentially loan forgiveness programs, especially for federal loans. Discuss your circumstances with your loan servicer to understand what might be applicable for you.

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Written by Matthew Levy

Matthew is a freelance financial copywriter with 14+ years in financial services. He holds a Bachelor of Science degree in Economics with business and finance options and is a CFA Charterholder. He is from Vancouver, Canada, but writes from all over the world.