There are 43.2 million student loan borrowers in the United States, each with an average balance of $39,351. It’s difficult to keep up with such large amounts of debt, especially when you’re just starting out in the workforce. But what happens to the people who fall behind on their payments? Are the penalties purely financial, or can you go to jail for not paying student loans?
The police won’t arrest anyone just for missing a few of their student loan payments, but there are reasons for people to be concerned about it. And even though jail isn’t on the table for unpaid debts alone, the consequences of missed payments can still make a borrower’s life miserable. Here’s what people need to know about the laws regarding student loans and what happens when someone fails to pay them back.
Can you go to jail for not paying student loans?
No. Technically, it is illegal to arrest someone for failing to pay back their student loans. Jail time for unpaid debts used to be a regular occurrence. But Congress outlawed the practice and the Supreme Court ruled it unconstitutional back in 1833.
Today, there is a clear distinction between the punishments for breaking the two types of law:
- Civil: Matters are legal proceedings between individuals or organizations (lenders, for example.) Punishments include fines and other monetary reparations. Civil offenses are usually a failure to perform one’s legal duty. They include actions like traffic violations, slander, and negligence.
- Criminal: These are disputes between the government and an individual or organization. The government seeks punishment for a misdemeanor or felony. Punishments include fines and possible jail time. Criminal offenses are often much more serious and include violent crimes like theft and assault.
The failure to pay back one’s debts, including student loans, falls under civil law. Lenders can sue the offending borrower, but jail is not a possible outcome — even if the court convicts them.
Why is jail such a common fear?
If it’s illegal to take someone to jail for not paying student loans, why do arrests still happen? It’s actually for the same reason that many other minor civil offenders end up in jail. They failed to attend their court proceedings.
Failing to show up for a court date is a criminal offense and can cause the issuance of an arrest warrant. The legal term is “contempt of court” or “failure to appear” and can lead to arrest and jail time.
People who default on their student loans are open to lawsuits from their lenders. If a lender chooses to sue, the borrower will have to appear in court to address the accusations. If they don’t, it’s not the failure to pay that will land them in jail, but failing to answer the court summons.
Borrowers miss their court dates for a variety of reasons, sometimes for issues that are at least partially outside of their control. For example, they might:
- Be unable to miss work on their court date
- Not receive their notice of summons in the mail
- Need to care for a dependent on their court date
There’s only so much that people can do to reduce the likelihood of these happening. Those who can’t afford to miss work or pay someone to watch their child are stuck in a lose-lose situation.
Many people are also simply unaware of the importance of showing up to their court dates. They might not update their address with their lenders and miss the notice for their summons.
Here’s what to do when you miss your court date.
What happens if you don’t pay back student loans?
Paying off student loans is a test of endurance. It takes the average borrower 20 years to pay off their balances in full. Maintaining a perfect payment record for two decades straight isn’t easy.
Neither private nor federal lenders will sue student loan borrowers for missing a payment or two. But there are consequences, especially if the behavior continues for too long.
Here’s how the process works:
Whenever a borrower misses a payment, their account becomes delinquent. It will keep that status until the borrower makes up the missing payment, addresses the issue in another way (like forbearance), or enters into default.
Private and Federal student loan providers will report delinquencies after 30 and 90 days, respectively. That can have a significant negative impact on a borrower’s credit scores.
The monetary penalties for delinquency also vary by lender. Private student loan providers set their own rules. Federal student loan providers can charge up to 6% of the missed payment balance if the delinquency lasts longer than 15 days.
Student loans enter default after extended delinquency. With private lenders, it’s usually after just 120 days. Federal lenders take a bit more time, usually allowing at least 270 days.
Whether borrowers hold private or federal loans, entering default has extreme consequences. It can:
- Cause the entire remaining principal and interest balance to come due
- Prevent the borrower from receiving Federal student loan assistance
- Damage the borrower’s credit scores
- Lead to a lawsuit and wage garnishment
Again, if a borrower defaults, their lender can sue them. If they don’t show up to court, a judge may issue a warrant for their arrest. Make sure to address any delinquent loans as soon as possible to avoid the possibility.
What to do if you can’t pay back your student loan
When borrowers realize that they might not be able to make their student loan payments, they should contact their lender as soon as possible.
There is plenty of aid available to borrowers who are struggling with student loans, especially federal ones. That includes:
- Income-based repayment plans that adjust payments down to a reasonable level for the borrower’s earning power
- Consolidation loans that can reduce the number of payments, extend the repayment term, and lower monthly payments
- Forgiveness programs that can discharge or cancel large portions of a borrower’s debt
Private lenders are less flexible than federal student providers and don’t offer the same aid programs. But it’s still beneficial to contact them when there’s a problem making payments.
They usually have their own strategies in place to help borrowers keep up with their payments. Either way, don’t ignore the problem. Be proactive and take timely steps to avoid delinquency, default, and lawsuits.
The bottom line
You won’t go to jail for defaulting on your student loans, but it’s important that you obey any court summons, because you CAN go to jail if you’re found in contempt of court. If you anticipate payment problems, have a preemptive chat with your lender to review your options. You don’t want to have to deal with debt collectors or worry about court appearances.