During the 2016-17 school year, the average student at a public four-year institution can expect to pay $3,770 in tuition and fees, according to The College Board's annual Trends in Pricing report. Facing those kinds of expenses, most students are clearly going to need financial aid to pay for higher education. And as a result, former students are likely to face dauntingly high amounts of student loan debt.

If you're facing more debt than you can comfortably pay, though, defaulting on your student loan debt is a really bad place to start. Most student loans are funded by the federal government, and that's one lender you really don't want to aggravate. The federal government has far more options than most lenders do to collect its money from defaulting borrowers, and none of those options create pleasant experiences for said borrowers.

College student on library steps


What can happen if you default on a student loan

First off, if you default on a federal student loan (meaning that you haven't made a payment in 270 days), the entire loan may become due immediately regardless of your original payment schedule. The Department of Education will then typically send your debt to a collections agency. To make matters worse, you'll be held responsible for the fees that collections agency charges. Anything you pay toward your loan at that point will go first to collection agent fees, then to the actual loan balances. This means your loan balance could rise by as much as 25%. 

The government can also seize assets that are not available to other lenders. The Department of Education can ask the Treasury Department to grab funds the government would otherwise be paying you and apply it to your student loan debt instead. For example, if you're due an income tax refund, the Treasury Department would send the money to the Department of Education instead of to you, and it would be applied to your student loan balance. The Treasury Department can also seize a portion of your federal benefits, including any Social Security benefits you're receiving. 

If that's not enough, the government can also take up to 15% of your disposable income (meaning the income left over after payroll deductions) straight out of your paycheck. The Department of Education insists that this is a tool of last resort, and it will send a notice to borrowers 30 days before wage garnishment begins to give them a chance to avoid this dismal fate. 

Unlike most types of debt, there's no statute of limitations for collecting on federal student loans (which includes private loans that were guaranteed by the federal government). So even decades after taking out the loan, the federal government can continue garnishing your wages, benefits, and so on until your balance is paid in full. 

The good news is that the federal government really doesn't want you to quit paying your student loans, and it offers several programs to help if you run into financial difficulties. For most borrowers, the easiest way to make student loan payments more affordable is to pick a different payment schedule. You can switch to a different payment schedule at any time using the My Federal Student Aid web portal; several of the repayment plans limit your maximum student loan payment to a percentage of your income, which can be a considerable relief for low-income or unemployed borrowers. Under these plans, any debt that's left after 20 or 25 years of payments is forgiven. 

In short, going into default on federal student loans will create a horrible and expensive mess of your life. If you're in such a financial predicament that you can't afford to pay all of your debts, pick a different lender to stop paying.