What Happens If You Never Pay Off Student Loans? Consequences, Timelines, and Fixes (2025)

Sep, 16 2025

You don’t go to jail for not paying student loans, but the problem doesn’t sit still. Interest keeps growing, fees can pile on, and your lender gets more aggressive the longer you ignore it. In the U.S., federal loans can trigger wage garnishment and tax refund seizures. In Canada, the CRA can take tax refunds and garnish wages for federal student loans. Private lenders can sue. Your credit gets bruised early and stays that way until you act.

This guide sets honest expectations, then gives you the playbook to avoid the worst, or dig out if you’re already there. You’ll see what the timeline looks like, what the real risks are, and the fastest fixes that actually work in 2025.

TL;DR: What really happens if you never pay?

• Missed payments first hit your credit; long nonpayment leads to student loan default, collections, and legal powers (U.S.: wage garnishment/tax refund offset; Canada: CRA collections).
• Interest and costs grow. Your balance can snowball, especially on private loans; federal Canada loans have no interest, but penalties and collections still add up.
• Default blocks new aid, ruins credit, and can follow you for years. Federal U.S. loans have no statute of limitations for collections.
• You have exits: income-based plans (U.S. SAVE), Canada’s RAP, deferment/forbearance, rehabilitation, consolidation, or settlements for private loans.
• Worst case is avoidable if you act early. If your payment is unaffordable, switch to income-driven/RAP. If already in default, rehab or consolidate.

The timeline: From a missed payment to full-blown default (U.S. and Canada)

People click this question because they want the clock. What happens, and when?

U.S. federal loans (Direct/FFEL held by ED)

• Day 1-29 late: You’re delinquent. You’ll get reminders. Interest accrues. No collections yet.
• 30-89 days: Late is usually reported to credit bureaus around 30 days past due. Your score dips. Options like SAVE can still reset the clock quickly.
• 90-269 days: Multiple late reports hit. Collections efforts pick up. You can still enter income-driven repayment (IDR) to fix it.
• 270+ days: Default. The whole balance accelerates. Your account can move to collections. Government tools kick in: administrative wage garnishment (no court order), federal tax refund and Social Security offsets, and added collection costs.

Source: U.S. Department of Education, Federal Student Aid (default at 270 days for most federal loans).

U.S. private loans

• 30-120 days: Depends on the contract. Late fees and credit reporting usually start at 30 days late. Default triggers vary (often 120-180 days).
• After default: The lender can sue. If they win, they can garnish wages (with a court order), place liens, and levy bank accounts (state law varies). Co-signers are fully at risk.

Canada federal student loans (CSLP/NSLSC)

• Day 1-89 late: You’re delinquent. Interest on federal loans is $0 (permanent since 2023), but missed payments still matter.
• 90-269 days: Credit damage starts once the loan is past due and reported. Collection contact increases. You can still apply for Repayment Assistance Plan (RAP) to bring payments down, even to $0 based on income.
• 270+ days (about 9 months) of nonpayment after entering repayment: Default. Your loan can be sent to collections, including the Canada Revenue Agency (CRA). They can take tax refunds and garnish wages without going to court.

Source: Canada Student Financial Assistance Program and the National Student Loans Service Centre (NSLSC): default generally after 9 months of nonpayment in repayment.

Canada provincial loans

Provinces follow similar timelines, but rules vary. Many provinces coordinate with NSLSC and offer provincial RAP. If you’re in Ontario, check OSAP’s pages for provincial RAP and collections details. Provincial debts can also go to collections-sometimes via provincial ministries or CRA set-off.

The fallout: Money, credit, and legal consequences if you ignore it

Here’s the hard truth: ignoring student debt is expensive and limiting. The pain shows up in four places-your balance, your credit, your paycheck/taxes, and your future options.

• Balance growth: Interest (except Canada federal), late charges, and collection costs can balloon what you owe. Private loans are the worst here. Federal U.S. loans can add collection costs after default. Canada’s federal loans have no interest, but collections and penalties still make it costlier to wait.
• Credit damage: 30+ days late gets reported and sticks for up to seven years in the U.S. and Canada. Default is a deeper mark. Your cost of borrowing rises, and landlords/employers who check credit may raise eyebrows.
• Government collections (U.S. federal): Administrative wage garnishment (often up to 15% of disposable pay), Treasury offset of tax refunds, and Social Security benefit offsets (with protections for low benefits). No court order needed.
• Government collections (Canada federal): CRA can offset your tax refunds and benefits and garnish wages for defaulted federal student loans without court. They can also work with your bank or employer to collect.
• Private lenders: They need a court judgment to garnish wages in both countries. If they sue and win, they can garnish wages, levy accounts, and place liens depending on local law.
• Loss of benefits: In the U.S., default blocks new federal aid and some licensing/certifications can be affected in certain jurisdictions. In Canada, you can lose eligibility for new aid and interest relief until you rehabilitate the loan.
• No easy expiration: U.S. federal loans have no statute of limitations for collections. Private loans do, but it varies by state. In Canada, federal student loans are enforced through the CRA’s powers; don’t bank on time alone to save you.

Two quick snapshots:

• U.S. borrower ignores $28,000 in federal loans: after 9 months, default. Tax refund gets seized, wages garnished 15%, balance grows with interest and costs, credit score drops 100+ points. They later rehab with nine affordable payments and switch to SAVE with a $60/month payment tied to income.
• Ontario borrower ignores $17,000 in Canada federal/provincial loans: after about 9 months, default. CRA takes their tax refund, garnishes wages. They enroll in RAP, payments drop to $0 for six months, then resume based on income. Credit takes time to heal, but payments are now sustainable.

Your exits: Affordable payments and fast cures that actually work

You’ve got more control than it feels like. The key is matching your situation to the right fix.

If you’re struggling but not in default

1. Switch to an income-based plan.
   • U.S.: Apply for SAVE (through Federal Student Aid). Payments can be as low as $0 based on income, using 225% of the poverty line to shield your earnings. Undergrad-heavy loans often pay 5% of discretionary income.
   • Canada: Apply for RAP via NSLSC (and your province if needed). If your income is low, your payment can be $0. RAP reviews every 6 months.
2. Ask for deferment/forbearance (short-term only). Use it if you just need a few months to stabilize. Don’t use it as a lifestyle-it just delays the problem and can grow the balance (except federal Canada’s interest-free portion).

If you’re already in default

1. Rehabilitation
   • U.S. federal: Make 9 affordable monthly payments within 10 months (your collector sets a formula based on income/expenses). Default notation comes off your credit for that loan, and collections (garnishment/offset) stop after you’ve made required payments.
   • Canada federal: Contact NSLSC to set up a rehabilitation or consolidation into a new agreement. Once you’re back in good standing, CRA collections stop.
2. Consolidation
   • U.S. federal: Direct Consolidation can pull you out of default faster than rehab, often within weeks, then you pick an IDR plan. Downside: default stays on your credit, and collection costs may capitalize.
   • Canada: Consolidation options vary; NSLSC can fold loans into a new agreement once you’ve met certain conditions, then you can use RAP.
3. Private loan hardship or settlement
   • Call the lender/collector and ask about hardship programs. If they won’t budge and you can fund a lump sum, settlements can be negotiated-ideally through a lawyer or reputable negotiator. Get everything in writing before you pay.

When discharge is possible

• U.S.: Bankruptcy discharge is possible if you prove undue hardship. Since late 2022, the Department of Justice created a standardized process that has made approvals more common. Talk to a bankruptcy attorney who understands the new guidance.
• Canada: Student loans can be discharged 7 years after you ceased to be a student (or 5 years with court-approved hardship) under the Bankruptcy and Insolvency Act. Discuss with a Licensed Insolvency Trustee.

Rules of thumb

• If your monthly payment is more than ~10% of your take-home pay, apply for SAVE (U.S.) or RAP (Canada). You’re a good candidate.
• If you’re already in collections, rehab or consolidate-don’t wait for your next tax season to get blindsided.
• Use deferment/forbearance for emergencies, not as your ongoing plan.

Step-by-step playbooks, examples, and a quick checklist

Here’s how to move from “overwhelmed” to “handled,” no matter where you are today.

Playbook A: I can’t make my payment this month

1. Log in to your loan portal (U.S.: studentaid.gov; Canada: NSLSC). Check due dates and status.
2. Apply for an income-based plan (SAVE/RAP). This can drop your payment to $0 quickly.
3. Ask your servicer for a short forbearance/deferment if the income-based change won’t process in time.
4. Update autopay once your new amount posts. Autopay can also reduce the rate (U.S. servicers often give a 0.25% discount).

Playbook B: I’m 90+ days late, not yet in default

1. Apply for SAVE (U.S.) or RAP (Canada) today. Don’t wait for “the perfect plan.”
2. Ask for a backdated forbearance or a temporary arrangement to stop credit reporting while your new plan processes (servicers have some discretion).
3. Make a token payment you can afford this week. Momentum matters and can reduce collection pressure.
4. Set phone boundaries: pick one weekly time to answer calls and keep notes. Offer your plan; don’t promise what you can’t pay.

Playbook C: I’m in default (collections, garnishment, or CRA involved)

1. U.S.: Choose rehab or consolidation. If your wages are already garnished and money is tight, rehab often makes more sense, because garnishment can stop after you make the required rehab payments. If you need the fastest reset, consolidation is quicker.
2. Canada: Call NSLSC to set up rehabilitation or a new consolidation agreement. Ask exactly what stops CRA actions and when that will happen.
3. Private loans: If sued, answer the lawsuit. Many borrowers lose by default because they don’t respond. Ask about hardship plans. If settlement is the goal, save up a realistic lump sum and negotiate in writing.
4. Once current, switch immediately to SAVE/RAP to lock in a sustainable payment and avoid sliding back.

Example: Quick turnaround with income-based payments

Jordan makes $42,000, lives alone, and owes $31,000 in U.S. federal loans. On the SAVE plan, their payment drops to around the price of a monthly phone bill. They avoid default, keep filing taxes normally, and their credit starts to improve within a few months of on-time payments.

Example: Canada RAP buys breathing room

Riya in Ontario earns $2,600 net per month and owes $22,000 split between federal and provincial loans. On RAP, her payment is $0 for six months. She uses the window to build a $1,000 emergency fund and then moves to a small payment tier as her income rises.

One-page checklist

• Confirm your loan types (U.S. federal/private; Canada federal/provincial).
• Check status: current, delinquent, or defaulted.
• Apply for SAVE (U.S.) or RAP (Canada).
• Ask about deferment/forbearance to bridge processing time.
• If in default: rehab or consolidate (U.S.); rehab/consolidate via NSLSC (Canada).
• Set autopay once affordable payment posts.
• Rebuild credit: on-time payments for 6-12 months; consider a secured card if needed.

Mini‑FAQ: The questions you’re probably asking next

• Can I be arrested for not paying student loans?
  No. Debt is not a crime in the U.S. or Canada. Court orders and collections are civil, not criminal.
• Do student loans “fall off” if I wait long enough?
  U.S. federal loans don’t have a statute of limitations for collections. Private loans do, but it varies widely-and restarting payments or acknowledging the debt can reset the clock. In Canada, federal student loans are enforced through CRA; waiting rarely helps.
• Will my degree be revoked?
  No. But schools can hold transcripts or refuse future enrollment until you pay certain institutional debts. This is separate from government student loans.
• What about forgiveness?
  U.S.: SAVE and other IDR plans can forgive balances after 20-25 years; targeted cancellation exists (e.g., PSLF, disability discharge, school closure). Canada: RAP can write down interest/principal over time on low incomes. Don’t count on future mass cancellation; use the programs that exist today.
• Does moving abroad help?
  Not really. U.S. and Canada can still collect, and you’ll face problems when you file taxes, return home, or interact with domestic banks. It also doesn’t stop credit damage.
• What happens to co-signers?
  They’re fully liable on private loans. Missed payments hit their credit and they can be sued or collected from.
• Will default ruin my credit forever?
  No, but it hurts for years. Many negative items age off around 7 years (credit bureau policy), but federal U.S. collections can last indefinitely. You can rebuild by getting current and paying on time.
• Is bankruptcy a real option?
  Sometimes. U.S.: with the DOJ’s 2022 guidance, more borrowers are getting relief when they show undue hardship. Canada: student loans are dischargeable after 7 years from end of studies (5 with hardship). Get legal advice.

Red flags and pitfalls to avoid

• Waiting for tax season: if you have a U.S. default, your refund can be seized. Fix it before you file.
• Ignoring CRA mail: they can garnish without court. Call NSLSC and set up rehab/RAP.
• Paying random collectors: verify the debt and the agency before paying. Scams exist.
• Too-good-to-be-true “forgiveness” firms: enroll in official plans yourself (free) or work with a nonprofit or trusted advisor.

Where these facts come from

For the U.S., policies come from the U.S. Department of Education’s Federal Student Aid, the Treasury Offset Program, and Consumer Financial Protection Bureau guidance on collections. For Canada, rules come from the Canada Student Financial Assistance Program, the National Student Loans Service Centre, and CRA collection authorities. Programs like SAVE and RAP are the official channels-use them.

If you remember one thing: Don’t wait for a miracle. If you can’t afford your payment, switch to an income-based plan. If you’re in default, rehab or consolidate. That’s how you stop the bleeding and get your life back.