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What if you don't repay your student loan in the US? Here are the consequences

ByAdarsh Kumar Gupta
Oct 30, 2023 05:28 PM IST

If one doesn't repay the student loans, it may lead to serious consequences.

Student loan repayments have resumed in the US on October 1, 2023 after it was paused for more than three years because of the pandemic. The development has resulted in financial strain for the students.

Borrowers have started making federal student loan payments in October after it was paused for more than three years because of the pandemic.(AP)
Borrowers have started making federal student loan payments in October after it was paused for more than three years because of the pandemic.(AP)

Meanwhile, some student loan borrowers are facing customer service issues with their loan servicers. They are having to deal with dropped calls and long wait times while looking for answers and resolution from their servicers. Recently, wrong repayment information was provided to some borrowers which added to their stress.

What will happen if one doesn't do ongoing repayment of student loan in the US?

If one doesn't repay the student loans, it may lead to serious consequences as per time frames. Defaulting on the repayment of student loans will affect your credit score.

When you miss the payment on your due date, the loan becomes delinquent. The amount will be considered delinquent until it is paid off. If the amount remains delinquent for 270 days, your loan will move into default. It means you have failed to adhere to the loan agreement and do the payments.

After the student loan default happens, federal government initiates procedures to reclaim its money. The government may seize your tax return or may take a bit of your monthly income to pay back the loan.

However, the existing "One-year on-ramp for student loan payments" provides you a one year cushion even if the repayment is not done.

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One-year on-ramp for student loan payments

The on-ramp is a 12-month period which starts from October 1, 2023 and will end on September 30, 2024. During this period, even if the repayment is not done, it will not be considered as delinquency, default and won't affect your credit score.

However, student must be careful of the fact that in case of not repaying the loan during this on-ramp period, interest will keep accruing. Thus, the balance of loan money would keep increasing due to additional interest.

What to do if one is unable to pay student loan

In case of inability to pay the student loan for various reasons, it's advisable to contact your loan servicer about how to manage the issue.

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Read breaking news, latest updates from United States on topics related to politics, crime, along with national affairs. Stay up to date with news developments on Kamala Harris, Donald Trump,and Joe Biden along with Super Bowl 2025 Live Updates.
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