Student loans don't go away after seven years. There is no program for loan forgiveness or cancellation after seven years. But if you recently checked your credit report and wondered, “why did my student loans disappear?” The answer is that you have defaulted student loans.
If you default on your student loan, that status will be reported to national credit reporting agencies. This reporting may damage your credit rating and future borrowing ability. Also, the government can collect on your loans by taking funds from your wages, tax refunds, and other government payments.
No, you can't be arrested or put in prison for not making payments on student loan debt. The police won't come after you if you miss a payment. While you can be sued over defaulted student loans, this would be a civil case — not a criminal one. As a result, you don't have to worry about doing any jail time if you lose.
In an extreme case, yes. If you default on student loans, one of the consequences can be a lien on your assets, including a house. (The federal government has done this in the past.)
Yes, federal student loans may be forgiven after 20 years under certain circumstances. But only certain types of loans are eligible for forgiveness, and you must be enrolled in a qualifying repayment plan. You'll also need to stay out of default on your loans.
Federal loans can also affect your bank account directly. Unlike private loans, the government doesn't need to sue you in court before garnishing your bank funds. However, only a portion of your income or savings can be seized, and certain benefits like Social Security are protected.
Defaulting on student loans is common, especially when borrowers face financial challenges. While missing payments can lead to serious consequences, such as damaged credit or a court summons, you cannot be arrested or jailed simply for not paying your student loans.
Leftover student loan money might feel like a windfall, but it's really not. Remember—you borrowed that money and you'll have to pay it back with interest when your loan is due. Consider sending the leftover funds back to your federal or private student loan servicer as a loan payment.
In certain situations, you can have your federal student loans forgiven, canceled, or discharged. That means you won't have to pay back some or all of your loan(s). The terms “forgiveness,” “cancellation,” and “discharge” mean essentially the same thing.
You can also get your student loans written off in the case of death, bankruptcy, disability, or in the case of fraudulent behavior at your college or university. There are also plenty of forgiveness programs like Public Service Loan Forgiveness which reward people in certain fields.
Some say they can't afford it, while others are tangled in bureaucratic snafus. Many people are taking advantage of an “on-ramp” period that lasts through September, during which late payments will not be reported to credit bureaus and borrowers will not be placed into default, though interest will continue to accrue.
The average federal student loan debt is $37,853 per borrower. Outstanding private student loan debt totals $128.8 billion. The average student borrows over $30,000 to pursue a bachelor's degree.
If you are delinquent on your student loan payment for 90 days or more, your loan servicer will report the delinquency to the national credit bureaus, which can negatively impact your credit rating. If you continue to be delinquent, you risk your loan going into default.
Are student loans forgiven when you retire? No, the federal government doesn't forgive student loans at age 50, 65, or when borrowers retire and start drawing Social Security benefits. So, for example, you'll still owe Parent PLUS Loans, FFEL Loans, and Direct Loans after you retire.
No, you can't go to jail for not paying your student loans. So if that was a fear you had, take a deep breath—no one is coming to arrest you if you miss a payment. But like we mentioned, you can be sued over defaulted student loans. This would be a civil case—not a criminal one.
The most important thing you can do to maintain healthy credit is make sure you're paying your bills on time — student loans are no exception. Even one missed payment can lower your credit score, and late payments can stay on your credit report for up to seven years.
Approximately half of student loan debt holders say their debt has impacted their life choices. One third say it has impacted their ability to continue their education (33%) while 14% say it has impacted their decision to start a family.
Though you can be sued in court in an effort to collect defaulted student loans, it will not be a criminal case.
Your debt could be sold or transferred to multiple debt collection agencies without your knowledge, so it's a good idea to always verify that the debt is legitimate before you agree to make any payments or give any information to a debt collector.
Student loan deferment and forbearance
If you are having trouble paying back your student loans, you may qualify for: Loan deferment - Payments are postponed. In most cases, the interest money you owe will continue to accrue (grow).
The federal government won't take your home because you owe student loan debt. However, if you default and the U.S. Department of Education cannot garnish your wages, offset your tax refund, or take your Social Security Benefits, it may sue you.
What Accounts Can the IRS Not Touch? Any bank accounts that are under the taxpayer's name can be levied by the IRS. This includes institutional accounts, corporate and business accounts, and individual accounts. Accounts that are not under the taxpayer's name cannot be used by the IRS in a levy.
Your loan can be discharged only under specific circumstances, such as school closure, a school's false certification of your eligibility to receive a loan, a school's failure to pay a required loan refund, or because of total and permanent disability, bankruptcy, identity theft, or death.