I have $30,000 in student debt. What’s the worst that could happen if I don’t pay it?

I have $30,000 in student debt. What’s the worst that could happen if I don’t pay it?

Aditi Shrikant

5 min read

Dear Dollar Signs,

I have $30,000 in student debt. What is the worst that could happen if I stop paying my loans? As of now, I’m still making payments, but I’m tempted to stop.

I don’t care about purchasing a home or owning property. I currently have an apartment and don’t spend much time there. I also don’t want to have kids — I never have.

I’d rather spend my disposable income on traveling or experiences. What consequences would I be facing if I simply stopped paying?

Broken-down Borrower

Dear Borrower,

Not paying off your student loans can be an understandable temptation, especially when you’re facing what feels like an insurmountable amount of debt.

But skipping payments would also add untold uncertainty and stress to your life, including aggressive debt-collection calls, legal notices (for private loans), plus possible garnishment of your paycheck and tax refunds (for federal loans).

Betsy Mayotte, president of the Institute of Student Loan Advisors, says she has been fielding this question more often lately because the SAVE plan — a Biden-era initiative that lowered student-loan payments, prevented interest accumulation and accelerated forgiveness — was terminated this year.

Mayotte and I both strongly discourage you from going this route.

Even if you don’t want to buy a house, not paying can lead to other consequences that can significantly affect your quality of life. Having outstanding debt can damage your credit score and make it harder to get a loan.

“Unless you’re going to live off cash under your mattress for the rest of your life, defaulting on your loans will affect you,” Mayotte says.

For one, your debt balance will actually increase because you’ll be charged collection fees. You might be thinking: What does it matter if the balance increases if I don’t plan on paying it?

Well, if you have federal loans, the government can garnish up to 15% of your wages. It can also withhold your tax refund and Social Security benefits without a court order. Private lenders, on the other hand, typically must sue you in court before they can garnish wages or seize your assets.

Federal loans typically default after 270 days of missed payments, but private loans have a much shorter runway. Sallie Mae, for example, typically considers loans in default after 120 days of missed payments.

There is a statute of limitations for those who default on private student loans, which varies by state. This is usually between three and 10 years. Federal student loans, however, have no statute of limitations.

“You might not care about your credit, but you’ll need it for something at some point. If you’re in default and your credit is poor, the interest rates you’re offered will most likely be higher, because you’re seen as a higher risk,” Mayotte adds.

In addition, potential employers and landlords may check your credit, and having a low score could hurt your chances of getting a job.

Federal student loans also offer income-driven repayment plans, which allow you to make lower monthly payments for a period of generally 20 to 25 years, although in some cases forgiveness may occur sooner, depending on the plan and loan balance. Payments are a percentage (typically 5% to 20%) of your discretionary income, which, depending on your plan, is the difference between your annual adjusted gross income and 100% to 225% of the federal poverty guideline for your family size and state.

You can also request forbearance from your loan servicer if you are temporarily and genuinely unable to make your scheduled monthly loan payments due to financial difficulties, medical expenses and/or a change in your employment status, among other reasons. (Read more about that here.)

If you’re struggling to pay down debt, it may help to set a stricter budget. The 50/30/20 rule is a common framework and a good starting point if you need some structure. It calls for allocating 50% of your income to needs, such as housing; 30% to wants, like vacations and streaming services; and 20% to savings and debt repayment, including retirement contributions and emergency funds.

This approach allows you to factor in travel and experiences while still being fiscally responsible.

Bernadette Joy, founder of the financial boot camp Crush Your Money Goals, paid off $300,000 of debt in three years by making small, consistent changes to her behavior.

Paying off that amount of debt requires a large income to begin with, of course, but her strategy could be used by others dealing with lower levels of debt. For example, she removed her credit-card information from her phone. “Deleting apps isn’t enough if your card is still saved,” she says. “I deleted saved payment information everywhere. That extra friction saved me a lot of money.”

Tracking your expenses to see exactly how much of your income is going toward streaming services, unused subscriptions or takeout meals you could cook at home can help free up cash to put toward your debt.

A small mental shift that helped Joy stay consistent, she says, was literally looking at her payoff amount instead of her total debt balance: “Seeing that number drop kept me far more motivated than staring at a large total.”

You might also be having too much money withheld in taxes. If you adjust your W-4 so your paycheck more closely reflects what you actually owe in income taxes, you can increase your monthly income. This means you won’t receive as large a refund during tax season, but having consistently higher paychecks can help you chip away at that $30,000.

The fact that you’ve continued to pay your loans suggests you understand that, in the long run, it’s the smart thing to do. While it’s tempting to imagine what you could afford to spend your money on without these payments, it’s best not to act on that impulse.