If you have student loans and you are not making payments, you will go into default after a certain amount of time—which is generally over 200 days. During this default you will have the option to set up payments with the lender to get out of default. If you choose to ignore your student loan debt, however, there are many things that will happen, three of which are listed below.
Affect Your Credit
Your lender will try to contact you repeatedly about your loan payments. If you do not talk with them after approximately 90 days of not making any payments, your case will be given to a student loan collection agency. This agency will then try to contact you to set up a payment plan with you.
If you still do not talk with any lenders and fail to start making your student loan payments, the student loan collection agency will likely report you to the credit bureaus. Once this happens, your credit is greatly affected.
Bad credit can prevent you from doing many things—from getting a credit card to buying a new home. It can also take a long time to raise your credit score.
Lose Eligibility for Payment Programs
When you cannot make your student loan payments, you will have the option to put your loan into deferment or forbearance. This means you put your loan on hold for a certain amount of time—which could be a few months—so you can work out your financial situation and start making your payments.
Before your loan went into default, you had the option to change your repayment plan, which may include lowering your monthly payment and the date your payment is due. Once you go into default you no longer have this option.
Garnish Your Wages and Tax Return
Your wages may be garnished in order to pay back your student loans. This means the government will take out a certain amount out of your paycheck each week in order to pay back this money that you owe.
When you file your taxes and are due money, the government can garnish this money and put the money towards what you owe. Even if you file jointly with a spouse, the government will still take the total refund away from you. The only way your spouse could not get their wages garnished is by filing separately from you.
If your wages are currently being garnished, you can contact a garnishment attorney to help you. They may be able to stop the garnishment or to get the amount of money taken out of your check lowered. This attorney can also give you other legal advice to help you. Contact a garnishment firm such as Alaska Cascade Financial Services for more information.