What Happens To Borrowers Who Default On Student Loans?

Posted on June 24, 2015 at 12:00pm by

A recent op-ed in the New York Times has created a controversy over the plight of graduates stuck with tens of thousands of dollars in student loans. In the op-ed, the author discusses his decision to purposefully default on his student loans.

After spending years obtaining an undergraduate degree and two master’s degrees, the professional writer had thrown up his arms in defeat and walked away from the prospect of ever making another payment.

What happens to people like the writer of the op-ed in the New York Times who default on student loans? It depends on whether the loans are private or federal. Defaulting on federal student loan debt can create a cascade of problems for borrowers.

  • Once loans go into default, the entire balance is immediately due. This includes the principal balance plus accumulated interest.
  • The loan holder may decide to take legal action against borrowers who have defaulted, seeking wage garnishments.
  • Defaulted student loans will be turned over to collection agencies that will add additional fees to the original balance. Collection agencies are also notorious for harassing borrowers with constant phone calls.
  • Say goodbye to tax refunds, because once borrowers default, refunds are intercepted by the IRS to repay outstanding student loans.

How Can I Discharge Student Loan Debt?

It should be clear that purposefully defaulting on student loans can have numerous negative consequences. Fortunately, there are other solutions for getting rid of student loans. If borrowers can prove ‘undue hardship’, it is possible to have student loan balances reduced or even eliminated altogether.

However, it may prove very difficult to pursue an undue hardship discharge without the help of an experienced bankruptcy attorney.

For more information on how The Sader Law Firm has helped people stuck with student loan debt, please explore our website.

The Sader Law FirmKansas City Bankruptcy Attorneys



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