A 2021 survey found 35% of student borrowers default on their loans—and two-thirds of those folks did so more than once.
The long-term commitment of student loan payments can be difficult for borrowers facing job loss or additional living expenses.
While defaulting on your student loans can result in serious consequences, including a court summons, you won’t go to jail for simply not paying.
In this guide:
- Can you go to jail for not paying student loans?
- Has anyone ever been arrested for not paying their student loans?
- Common consequences of not paying student loans
- Your options if you can’t pay your student loans
Can you go to jail for not paying student loans?
The consequences of default are serious, but you can’t go to jail for nonpayment of student loans.
You might have seen the headline about a Texas man being arrested for $1,500 worth of student loans. We’ll go into the specifics shortly, but he was arrested for being in contempt of court.
To keep from being arrested if your lender sues for repayment, pay attention to your mailbox. Keep an eye out for communications from your lender, collections attempts, and court notices.
If you can’t pay your student loans, you have certain rights when it comes to debt collectors through the Fair Debt Collections Practices Act (FDCPA). This prevents debt collections agencies from engaging in abusive collections practices such as:
- Trying to collect extra charges plus the amount you owe
- Threatening to have you arrested
- Harassing you (calling multiple times a day or using profanity)
- Misleading you in any way
If a collections agency uses these tactics, you have the right to sue them under that federal law.
Multiple states have passed laws governing how loan servicers can treat student borrowers. For example, in California, the Student Borrower Bill of Rights includes the following protections:
- Loan servicers must provide accurate information about repayment options. Borrowers must get accurate information about income-based repayment plans or other flexible repayment options to avoid default.
- Servicers and lenders must minimize fees. Fees are capped at 6% of the past-due amount.
- Loan servicers must notify borrowers they’re transferring their loan to a new servicer at least 15 days before the borrower is required to send in a payment.
- Prohibits unfair or deceptive practices.
Other states with a student bill of rights include the following:
- New Jersey
- New York
- Rhode Island
- The District of Columbia
If you’re facing default or delinquency, you have federal—and sometimes even state—rights that protect you from unfair debt collection practices and deceptive lenders.
Student loan lenders’ rights
Your lender also has rights to recover the money they’ve loaned you.
Depending on whether your lender is federal or private, they have different rights to collect.
Federal lenders have the right to:
- Accelerate your loan (the full balance is due at once)
- Garnish your wages
- Intercept your tax refund or other government income
- Add late fees and collections fees
- Remove your federal student loan protections (such as deferment and forbearance options)
- Decline to provide you additional federal loans or aid
- Report your nonpayment to the major credit bureaus
- Take legal action to enforce repayment (not often)
Federal student lenders have more rights than private lenders. Since they’re under the federal government, they can garnish your wages and take your tax return to collect payment. Private lenders can’t do that without a few extra steps.
Here are the rights private lenders have:
- Accelerate your loan
- Send your loan account to collections
- Add late fees and collections fees (upward of 20% of your loan balance)
- Report your delinquency or default to the major credit bureaus
- Take legal action to pursue wage garnishment or property lien
Private lenders have a smaller arsenal to enforce repayment. Most times, they rely on collections agencies and the legal system to get their money back from borrowers in default.
Has anyone ever been arrested for not paying their student loans?
We mentioned a Texas man arrested in relation to his student loans. The full story is more complex than just missed payments.
Paul Aker was arrested for disregarding the legal system, not for defaulting on his loan. The steps that led to his arrest include:
- Aker defaulted on a private student loan in 1989.
- The private lender couldn’t collect the debt and transferred it to the U.S. Department of Education.
- The Department of Education attempted to collect the debt.
- The U.S. government sued Aker for the remaining balance on the loan.
- He failed to answer a legal complaint served to him, and a judgment was made in favor of the U.S. government.
- The government tried to collect the debt again.
- The court ordered Aker to attend a deposition. The U.S. Marshals Service called him to attend, and he refused.
- In 2016 (almost 30 years after default), an arrest warrant was issued.
Even after he was arrested, Aker didn’t spend time in jail. Instead, he was fined $1,200 for getting the U.S. Marshals Service involved.
This was years in the making. Aker ignored multiple collections attempts, missed court appearances, and dismissed legal summons. This all led to his arrest for contempt of court.
While this originated from unpaid student loans, the issue that earned him an arrest warrant was not showing up to court.
If you default on a student loan, arrest is unlikely. In the 2019 fiscal year, the federal government reduced the number of student loan default recovery lawsuits to 261.
Common consequences of not paying student loans
You might not spend time in jail if you don’t pay your student loan, but default has other serious consequences depending on whether you have a federal or private loan.
Federal loans move fast, with tools to enforce repayment with the full backing of the U.S. government.
Private loans have less power to enforce repayment, but that doesn’t stop them from enacting consequences such as collections and loan acceleration.
|Student Loan Default Consequences|
|Withhold tax refunds||✔|
|Ineligible for other forms of federal aid||✔|
|Loss of federal protections (including IDR, rehabilitation, and forbearance)||✔|
|Legal action (not often)||✔|
|Suspended professional licenses (in some states)||✔|
|Report delinquency or default on your credit report||✔||✔|
|Added collections and late fees||✔||✔|
|Involve collections agencies||✔||✔|
|Damage to your cosigner’s credit||✔||✔|
|Jeopardized employment (denied security clearances or promotions)||✔||✔|
|Withheld academic transcripts||✔||✔|
|Legal action to request wage garnishment or a lien||✔|
One powerful option federal loan holders have to get their money back is to garnish wages. They don’t need a court order to begin taking money from your paycheck—just a notice stating your wages will be garnished within 30 days.
The federal government orders your employer to withhold 15% of your disposable income to repay the defaulted loan, and this continues until the outstanding balance is repaid or the default is resolved.
Your options if you can’t pay your student loans
Most people don’t stop paying their student loans because they don’t want to.
It’s often tied to a change in your financial circumstances where you just can’t afford the monthly payment.
Regardless of why you can’t pay, there may be an option to alleviate the financial stress of a student loan payment.
Income-Driven Repayment Plan
Income-driven repayment plans are available from federal loan servicers.
These plans lower your monthly payment based on a percentage of your income. The downside is it lengthens your loan term, which means you’ll be paying off the loan for longer, and you’ll pay more in interest.
Deferment suspends your student loan payments. This is most common when you’re in school at least half-time or for a few months after graduation.
You don’t make payments on the loan during a deferment period, but interest still accrues. Deferment is available for federal and some private student loans.
Forbearance is similar to deferment since it suspends your student loan payments.
This is a short-term program to offer temporary relief for financial hardship.
Forbearance is less common with private lenders, but some offer this form of assistance. All federal loans offer forbearance as a benefit for student borrowers.
If you’ve defaulted on your federal student loans, rehabilitation is a one-time solution to help you get back on track with payments. It involves making nine consecutive on-time payments to your loan after enrolling in an income-driven repayment plan.
You can only use this option once, so it’s important to stick with the plan. This isn’t an option for private student loans, but your loan servicer may have options if you contact customer service.
Consolidation or refinance
Consolidating your student loans allows you to simplify your finances by combining multiple loans into one. That means one payment instead of several. In some cases, you may even qualify for a lower rate.
You can consolidate federal loans under the Direct Consolidation Loan and still maintain access to federal benefits like income-driven repayment plans or student loan forgiveness programs.
You can also consolidate (aka refinance) private loans (or a combination of federal and private) through another private lender.
Taking student loans out of the federal system and refinancing to them to private loans, however, will diminish your access to federal benefits and cannot be reversed. Therefore, it’s important to understand the consequences before considering this option.
Contact your lender
If you’re not sure what solution works best for your loan, one of the best things you can do is contact your lender to see what options are available. This is especially true for private loans since they have fewer protections than federal loans.
You may not find options such as rehabilitation or forbearance with a private lender, but yours should have options for student borrowers who are struggling to make their payments. You can also contact your federal loan servicer to find out which options you qualify for.