Another month, another student loan payment drains your bank account. The number barely seems to budge, but your budget feels the hit every single time. It is completely frustrating. A voice in your head might be screaming, “I’m done. I can’t do this anymore. Forget this.”
That urge to just walk away is powerful. Despite how tempting it feels to stop, you don’t want to do that. Ignoring your private student loan debt is detrimental to your financial health. If you want to avoid some very scary realities, you must find a way to keep up. Instead of just quitting, we’ll give you some real-world tips on what to do when you feel you can’t make another payment.
Your Credit Score Takes a Major Hit
Your payment history is the biggest factor in your credit score. Once you miss a private student loan payment by 30 days, your lender will likely report it to the credit bureaus. This single action can cause your score to drop significantly.
If you continue to miss payments, the damage gets worse. After 90 to 120 days of non-payment, your loan will enter default. A default is a massive negative event on your credit report that stays there for seven years. This drop in your credit score has real consequences, making it harder and more expensive to get a car loan, a credit card, or a mortgage.
Aggressive Debt Collection Begins
Once your loan is in default, your original creditor will ramp up its collection efforts. You can expect a constant stream of phone calls and letters. If they can’t get you to make a payment, they often sell your debt to a third-party debt collection agency.
These agencies are paid to be persistent. Their only job is to collect the unsecured debt you owe. The calls and letters will continue, becoming a source of daily stress and anxiety. It’s a dedicated campaign to pressure you into paying.
Your Loan Balance Actually Gets Bigger
This part sounds strange, but it’s true. When you stop paying, your loan balance grows. For every missed payment, the lender tacks on a late fee. These fees add up quickly.
Once the loan goes into default, things get worse. The creditor can add collection costs and other penalty fees to your principal balance. All the while, interest continues to accrue on the entire growing amount.
Your debt spirals, putting you in an even deeper financial hole than when you started. A temporary break from payments can lead to a much larger long-term problem.
Your Lender Can File a Lawsuit Against You
This is where things get serious from a legal perspective. Private student loans do not have the same protections or options as federal loans, like income-driven repayment or broad forgiveness programs. The primary tool a private creditor has to force payment is the court system.
Your lender can file a lawsuit against you for the full amount of the debt, plus fees and interest. If you ignore the lawsuit, they will almost certainly get a default judgment against you. A court judgment is a powerful legal document that gives the creditor new ways to collect what you owe.
You Could Face Wage Garnishment
After winning a lawsuit and getting a judgment, a creditor can ask the court for a writ of garnishment. This is a court order sent directly to your employer. The order legally requires your employer to withhold a portion of your earnings and send it directly to your creditor. A garnishment means that a chunk of your paycheck is gone before you ever touch it. Depending on your state’s laws, this can be up to 25% of your disposable income. It can be a devastating financial blow, making it incredibly difficult to pay your other bills and living expenses.
What You CAN Do Instead of Ghosting Your Lender
Ignoring the problem only makes it worse and takes away your control. Taking proactive steps is the better path. You have options to handle your student loan debt that don’t involve a lawsuit or garnishment.
Talk to Your Lender Directly
Sometimes lenders offer short-term relief, like forbearance, if you are having temporary trouble making a payment. This only pauses your repayment plan, and interest often continues to grow, but it can provide breathing room.
Explore Debt Settlement
Debt settlement is a process where you or a representative negotiates with the creditor to accept a one-time, lump-sum payment that is less than your total balance. Once paid, the debt is considered settled and resolved for good.
Look into Credit Counseling
A non-profit credit counseling agency can help you analyze your budget and finances. They can help you create a repayment plan to manage all of your debts, though they do not provide legal resolutions.
Get Rid of Private Student Loans the Right Way With McCarthy Law
Private student loan debt can feel like a life sentence, but it doesn’t have to be. You do not have to ruin your credit and your future to finally get out from under this weight. There are legal and strategic ways to resolve the problem.
McCarthy Law provides nationwide student loan debt settlement support to help you see all of your options clearly. Our team can explain how a negotiated debt settlement works and whether it is the right solution for your financial troubles.