What happens if I just don't pay my student loans?
Same thing as for any debt: bank sues you, you lose, you are in an even deeper hole because you now owe them for the cost of the court case, your credit rating goes into the toilet, you may even have trouble retaining/finding a job. Being stupid is always more expensive. employed under the table and doesn't have a bank account If I could make that size 10,000,000 font I would.  Your friend likely also isn't paying taxes.  The student loan penalties will be nothing compared to what the IRS does to you.   Avoid taking financial advice from that person. "Never forget that student lenders and their collection agencies are dangerous and clever predators, and you, the student borrower, are their legal prey. They look at you and think, ""food."" My friend said she never pays her student loans and nothing has happened.  She's wrong. Something has happened. She just doesn't know about it yet. Each unpaid bill, with penalties, has been added to the balance of her loan.  Now she owes that money also. And she owes interest on it. That balance is probably building up very fast indeed. She's playing right into the hands of her student lender. They are smiling about this. When the balance gets large enough to make it worthwhile, her student lender will retain an aggressive collection agency to recover the entire balance. The agency will come after her in court, and they are likely to win.  If your friend lives in the US, she'll discover that she can't declare bankruptcy to escape this. She has the bankruptcy ""reform"" act of 2006, passed during the Bush 43 regime, to thank for this. A court judgement against her will make it harder for her to find a job and even a spouse. I'm not saying this is right or just. I believe it is wrong and unjust to make university graduates into debt slaves. But it is true. As for being paid under the table, I hope your friend intends on dying rather than retiring when she no longer can work due to age. If she's paid under the table she will not be eligible for social security payments.  You need sixteen calendar quarters of social security credit to be eligible for payments.  I know somebody like this. It's a hell of a way to live, especially on weekends when the local church feeding programs don't operate.  Paying people under the table ought to be a felony for the business owner." Collection agencies will eventually find you if you work for an employer that uses the credit bureaus for pre-employment screening, or you sign up for utilities or services that check your credit, or you enter into public record any other way (getting arrested, buying land, etc.). Such inquiries will put you on the grid where the collection agencies can find you and/or sue you. Two years out is about the point where they're looking for blood. The next time your friend applies for an apartment, utilities or cell phone service, she's going to get some calls. "Let me give you some advice from someone who has experience at both ends - had student loan issues myself and parents ran financial aid department at local university. Quick story of my student loan.  I graduated in debt and could not pay at first due to having kids way too early.  I deferred.  Schools will have rules for deference.  There are also federal guidelines - lets not get specific on this though since these change every year it seems.   So basically there is an initial deferment period in which any student can request for the repayments to be deferred and it is granted.  Then there is an extended deferment.  Here someone has to OK it.  This is really rather arbitrary and up to the school/lender.  My school decided to not extend mine after I filled out a mound of paperwork and showed that even without paying I had basically $200 a month for the family to live off past housing/fixed expenses. Eventually they had to cave, because I had no money so they gave me an extended deferment.  After the 5 years I started paying.  Since my school had a very complex way to pay, I decided to give them 6 months at a time.  You would think they would love that right?  (On the check it was clearly stated what months I was paying for to show that I was not prepaying the loan off) Well I was in collections 4 months later.  Their billing messed up, set me up for prepayment.  They then played dumb and acted like I didn't but I had a picture of the check and their bank's stamp on the back... They couldn't get my loan out of collections - even though they messed up.  This is probably some lower level employee trying to cover their mistake.  So this office tells creditors to leave me alone but I also CANNOT pay my loan because the credit collection agency has slapped a 5k fee on the 7k loan.  So my loan spent 5 years (kid you not) like this.  It was interest free since the employee stopped the loan processing. Point being is that if you don't pay the lender will either put your loan into deferment automatically or go after you.  MOST (not all) schools will opt for deferment, which I believe is 2 years at most places.  Then after that you have the optional deferment.  So if you keep not paying they might throw you into that bucket.   However if you stop paying and you never communicate with them the chances of you getting the optional deferment are almost none - unless school doesn't know where you live.  Basically if you don't respond to their mail/emails you get swept into their credit collection process.  So just filling out the deferment stuff when you get it - even if they deny it - could buy you up to 10 years - kid you not.   Now once you go into the collection process... anything is game.  As long as you don't need a home/car loan you can play this game.  What the collection agency does depends on size of loan and the rules.  If you are at a ""major"" university the rules are usually more lax, but if you are at the smaller schools, especially the advertised trade/online schools boom - better watch out.  Wages will be garnished very soon.  Expect to go to court, might have to hire an attorney because some corrupt lenders start smacking on fees - think of the 5k mine smacked on me.   So the moral of the story is you will pay it off.  If you act nice, fill out paperwork, talk to school, and so on you can probably push this off quite a few years.  But you are still paying and you will pay interest on everything.  So factor in that to the equation.  I had a 2.3% loan but they are much higher now.   Defaulting isn't always a bad thing.  If you don't have the money then you don't have it.  And using credit cards to help is not the thing to do.  But you need to try to work with the school so you don't incur penalties/fees and so that your job doesn't have creditors calling them.   My story ended year 4 that my loan was in collection.  A higher up was reviewing my case and called me.  Told her the story and emailed her a picture of their cashed check.  She was completely embarrassed when she was trying to work out a plan for me and I am like - how about I come down tomorrow with the 7k.  But even though lender admitted fault this took 20+ calls to agencies to clear up my credit so I could buy a house.   So your goal should be:"
Student loan is a class of unsecured loan.  The characteristics that define a student loan are, primarily, that it is a loan that is intended to be used by someone who is currently a student.  Beyond that, though, there are many variations. The different kinds of requirements usually have to do with who is eligible for the loan, and with what the loan is allowed to be used to pay.  Some loans have other limitations, such as only being allowed to be directly paid to the institution. Some student loans are federally guaranteed (meaning the Federal Government will repay the bank if you default).  Those have a lower interest rate, typically, and often have more stringent requirements, such as only full-time students being eligible, being need-based, and limitations on what the loan's funds can be used for.  See studentaid.ed.gov for more information. Many private student loans have quite lax limitations. Some for example have nearly no limitation as to what they can fund; many are allowed to be taken out by part-time students and even non-degree-seeking students in some cases.  Private loans usually have somewhat higher rates (as they're entirely unsecured) to go along with the lower restrictions and higher borrowing limits.  You'd have to see the specific details of any particular loan to know what it's allowed to pay for, so if you choose this route, know what you plan to use it to pay for before you go looking. "First, it's clear from your story that you very likely should be able to receive some financial aid.  That may be in the form of loans or, better, grants in which you just get free money to attend college.  For example, a Pell grant.  You won't get all you'd need for a free ride this way, but you can really make a dent in what you'd pay.  The college may likely also provide financial aid to you.  In order to get any of this, though, you have to fill out a FAFSA.  There are deadlines for this for each state and each college (there you would ask individually).  I'd get looking into that as soon as you can. Do student loans have to be paid monthly?  Any loan is a specific agreement between a lender and a borrower, so any payment terms could apply, such as bimonthly or quarterly.  But monthly seems like the most reasonable assumption.  Generally, you should assume the least favorable (reasonably likely) terms for you, so that you are prepared for a worst-case scenario.  Let's say monthly. Can I just, as I had hoped, borrow large sums of money and only start   paying them after college? Yes.  That is a fair summary of all a student loan is.  Importantly, though, some loans are federal government subsidized loans for which the interest on the loan is paid for you as long as you stay in college + 6 months (although do check that is the current situation).  Unsubsidized loans may accrue interest from the start of the loan period.  If you have the option, obviously try hard to get the subsidized loans as the interest can be significant.  I made a point to only take subsidized loans.   WARNING: Student loans currently enjoy a (nearly?) unique status in America as being one of the only loan types that are not forgivable in bankruptcy.  This means that if you leave college with $100,000 in debt that begins accruing interest, there is no way for you to get out of it short of fleeing the country or existence.  And at that point the creditors may come after your mother for the balance.  These loans can balloon into outrageous amounts due to compounding interest.  Please have a healthy fear of student loans.  For more on this, listen to this hour long radio program about this. Would a minimum wage job help,  Of course it will ""help"" but will it ""help enough""?  That depends on how much you work.  If you make $7.50/hr and work 20 hrs/week for all but 3 weeks of the year, after taxes you will be adding about $6,000 to offset your costs.  In 3 years of college (*see below), that's $18,000, which, depending on where you go, is not bad at helping defray costs.  If you are at full-time (40 hrs), then it is $12k/yr or $36k toward defraying costs.  These numbers are nothing to sniff at. Do you have any computer/web/graphics skills?  It's possible you could find ways to make more than minimum wage if you learn some niche IT industry skill.  (If I could go back and re-do those years I wouldn't have wasted much time delivering pizzas and would have learned HTML in the 90s and would have potentially made some significant money.) would college and full-time job be manageable together?  That's highly specific to each situation (which job?  how far a commute to it?  which major? how efficient are you?  how easily do you learn?) but I would say that, for the most part, it's not a good idea, not only for the academic-achievement side of it, but the personal-enrichment aspect of college.  Clubs, sports, relationships, activities, dorm bull sessions, all that good stuff, they deserve their space and time and it'd be a shame to miss out on that because you're on the 2nd shift at Wal-Mart 40hrs/week. How do I find out what scholarships, grants, and financial aid I can apply for?  Are you in a high school with a career or guidance counselor?  If so, go to that person about this as a start.  If not, there are tons of resources out there.  Public libraries should have huge directories of scholarships.  The Federal Student Loan program has a website.  There are also a lot of resources online found by just searching Google for scholarships--though do be careful about any online sources (including this advice!). Sermon: Lastly, please carefully consider the overall cost vs. benefit to you.  College in 2012 is anything but cheap.  A typical price for a textbook is $150 or more.  Tuition and board can range over $40k at private colleges.  There is a recent growing call for Americans to re-think the automatic nature of going to college considering the enormous financial burden it puts many families under.  Charles Murray, for one, has put out a book suggesting that far too many students go to college now, to society's and many individuals' detriment (he's a controversial thinker, but I think some of his points are valid and actually urgent).  With all that said, consider ways to go to college but keep costs down.  Public colleges in your state will almost always be significantly cheaper than private or out-of-state.  Once there, aim for As and Bs--don't cheat yourself out of what you pay for.  And lastly, consider a plan in which you complete college in three years, by attending summer courses.  This website has a number of other options for helping to reduce the cost of college." "&gt;&gt; I propose to make the requirements for finish high school and college degrees much much higher, as it was in the past.  &gt; Not gonna happen.  Totally agree with you! What I was proposing is what SHOULD be done.  &gt; waiting for disadvantaged kids to get higher scores will not happen until they get accepted into college.  Even then! Almost all disadvantaged kids, smart or not smart, the diploma they get is almost worthless. The diploma will not give them much advantage or improve their situation. The diploma barely even helps very smart kids from rich advantaged homes.  Actually, if in the past, no matter who you knew, no matter your family background, a diploma will almost always GUARANTEE a secure and advantaged life.  &gt; If you force schools to gain their income from future students earnings they will have high concern for kids that have a good P/E ratio. It will also stop the loan industry from putting these kids into debt.  In theory, you are correct. In practice, many many problems to implement. For starters, this makes college a very risky business because it's very hard to predict future income of its students, even the very smart and accomplished students. And I will give you a related example: colleges teach Computer Science (Programming) to many kids today, but the profession is about to die due AI and automation + outsourcing. This was unexpected 1-2 years ago.   Barely economists can predict the economy, so you want colleges to predict income based on what is taught?  &gt; The downside is that it may turn colleges into trade techs,   Actually, colleges are already trade techs because, today, almost all students study just(!) for the hope to get a job.  In the past, you studied to become a scholar and wise, and then pick some kind of a job of your interest where being generally smart and knowledgeable is needed.  BOTTOM LINE: Since you and I know that nothing will be done, no higher standards and no future-income based tuition, here's what what's happening with my son, which is what happened with me, which is still happening in Germany. No, I am not German, but I come from a German culture - my parents are of German descent, but I was born and raised in Israel.  It's called ""Master and Apprentice"".  I have been working since I was 13, with computers, and if you consider my age (55), when I was 13, no PCs with internet, and only punch cards were used to access a computer. My parents did not push me... it was me who felt the need to work, while I was studying (just like my father had that need when he was young).  My son, 13 today, but since he was 10, the apple does not fall far from the tree, found work (he's not even allowed to work by law) and is making money. He's right now teaching, administering and designing Minecraft ""worlds"" and applications.  **Hands on experience, especially taught from a Master is better than any Diploma!!!!**  He will probably go to some so-so college to get a piece of paper called ""Diploma"" WHILE he will continue working in whatever he's interested.  He will be successful like I am (not trying to brag). I never pushed him, but I explained to you some realities of the world.  LAST WORD: actually, most Masters, real Masters, are desperate to teach, for free, their knowledge, vision and know. And the system does not allow them to do that, to protect the colleges and universities. Only in Medicine, it's still happens. Think about it!!!!!" "Since you already have an emergency fund in place, focus your extra funds on paying off debts like student loans. While some have advised you to play the stock market, not one person has mentioned the word ""risk"". You are gambling (""investing"") your money in the hopes your money will grow. Your student loan is real liability. The longer you keep the loan, the more interest you will pay. You can pay off your student loan in 21 months if you pay $1,100 each month. After the 21 months, you can almost fully fund a 401(k) each year. That will be amazing at your age. Our company gives us the Vanguard Retirement Fund with a low expense ratio of 0.19%. It is passive automated investing where you don't have to think about it. Just add money and just let it ride." I wish this was the case in Canada.  I lost about 60k on my home in one year and have to sell now to move for work.    In the US I could simply default and the bank takes the loss.  In Canada if I default, CMHC pays the bank, then I'm sued by CMHC and stuck with the bad debt.    Simply put - here the onus of repayment is on the lender, not the lending institution.  It sounds good until you are the one looking at losing your shirt. As many have said consult a bankruptcy attorney and think of it this way:  Are you realistically going to be able to pay off said debt (less the student loans, you cant escape these in bk) in the next 7 years?  If not, strongly consider bankruptcy. It'll fuck your credit for 7 years, but if you're going to be pinching your pennies to barely cover interest for &gt;7 years anyway, who cares. Further, you don't need more credit anyway, so who cares if you cant get it.  If you do plan on the bk route, be sure you're comfortable with your job prior to filing. It will obviously fuck your credit score and many employers check said score when hiring. Chances of switching jobs are diminished to some extent.  EDIT: On a second note, 11k in debt is not that much money. Take a second job.. Sell shit.. Sell drugs.. Sell a kidney. Do something. 11k is not hard to earn. But earn it now before exorbitant interest rates turn it to 22k, then 44k, etc.. "You should hire a lawyer. The fact that they told you your personal information shows that they actually had it, and are not imposters, which is a good thing. The fact that they mislead you means that their intentions are not pure (which is not surprising coming from a collection agency of course). When dealing with collections (or any matter of significance for that matter), don't rely on their recording of the call, because they can always conveniently lose it. Make sure to write down every single detail discussed, including the date and time of the call, and the ID/name of the person on the other side. If possible - make your own recording (notifying them of it of course). It's too late to record the calls now, but do try to reconstruct as much information as possible to provide to your lawyer to deal with it. In the end of the day they will either provide you with the recording (and then you might be surprised to hear that what they said was not in fact what you thought they said, and it was just your wishful thinking, it is very possible to be indeed the case), or claim ""we lost it"" and then it will be a problem to either of you to prove who said what, but they'll have the better hand (having better lawyers) in convincing the court that you're the one trying to avoid paying your debts. That is why proper representation at all stages is important. As to the bankruptcy - it won't help for student loans, student loans is one of the very few types of debts you can't really run away from. You have to solve this, the sooner the better. Get a professional advice. For the future (and for the other readers) - you should have gotten the professional advice before defaulting on these loans, and certainly after the first call." In theory - Yes. So as long as someone will accept you as a (very) mature student, you plan to never earn over 21k a year for the next 30 years (no longer wiped out at 65), you could get a loan, slightly unethically (unless you fancy doing the course). Also if you did have to start paying it back - since interest rates are currently 6.1% this means the loan is doubling potentially just under every 12 years (approx) As to the side question of is it fraud?  I couldn't say.  Is a student getting maximum loans but planning on being a jobless bum for the rest of their lives and never paying back loans also committing fraud?  One could argue Yes, but i don't believe a lack of ambition is currently illegal.