What happens if I just quit my paying my student loan debt?
For a lot of new graduates, student loans are one of the highest bills that they have to pay every month. Unfortunately, the rising cost of college and the lack of job opportunities for new graduates have combined together to make a bad situation for many new graduates. Record numbers of former students cannot make the minimum payments on their loans with the salary they make after graduating. This has led many people to wonder if they should simply stop paying off their student loan debt.
The truth is that student loan debt is some of the most dangerous debt that young Americans can have. Student loans are a protected class of debt; unlike credit cards, mortgages, and car loans it’s next to impossible to default on student loans. It is also very unlikely that a person will be successful with trying to discharge them in a bankruptcy.
Why to Keep Paying Your Student Loan Debt
When a person stops paying their student loans, a lender is legally allowed to add whatever fees they want to the balance. Many people who have missed several payments report that they saw their balances double or triple due to penalty fees. When they were unable to pay the higher monthly payment associated with this, the lender garnished their paycheck. According to the law, a lender can take as much as 15% of a borrower’s paycheck to pay the student loan. By the time they add fees and other penalties, however, virtually none of this money goes to actually reducing the principal balance of the loan.
In the event that the student loans are issued by the government, it is possible for the United States to take any payment that it owes to the borrower. This includes tax returns, Social Security, and even Medicare reimbursements. Borrowers who do not have any income for the government to garnish are often surprised to see that their Social Security checks can be taken for debts that are decades old in some cases.
For these reasons, it is imperative that anyone with student loans takes steps to figure out how to pay them. If your budget doesn’t allow for the payments, find a debt counselor who can help you. There are ways to defer and refinance the debt to make payments more manageable.