My friend said she never pays her student loans and nothing has happened. She's been out of school for a couple years and is only employed under the table and doesn't have a bank account.

If I don't work "officially" and I don't maintain a bank account, what happens if I just don't pay?

  • 6
    Your friend shouldn't say never, she will eventually pay it back monetarily or otherwise.
    – NuWin
    Jun 17, 2016 at 22:07
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    How did your friend manage to become a student with the intellectual capacity that would permit her to believe this fabrication in the first place?
    – Tom W
    Jun 17, 2016 at 22:19
  • 3
    Right. You can't stay invisible forever unless you get completely out of the economy, and you give up a lot by trying do so.
    – keshlam
    Jun 17, 2016 at 22:20
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    @tomw, people can delude themselves into believing all sorts of things, if it's what they want to believe. No shortage of conspiracy theories, including economic fantasies like the sovereign citizen nonsense. Unfortunately intelligence and wisdom really are two separate things... not that there's enough intelligence either. (Remember, by definition, half the population has an intelligence below the median...)
    – keshlam
    Jun 17, 2016 at 22:27
  • 7
    What country are you in? The rules for student loans may vary. What kind of student loans are they? Private loans or another kind? Jun 17, 2016 at 22:49

5 Answers 5


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.

  • 9
    If only I could vote twice: "Being stupid is always more expensive."
    – NuWin
    Jun 17, 2016 at 22:07
  • 5
    Not quite the same as other debt: You can declare bankruptcy to escape some debts, but not student loans.
    – O. Jones
    Jun 18, 2016 at 12:28
  • @OllieJones Depending on jurisdiction.
    – user
    Jun 19, 2016 at 15:49
  • Correct. I meant in the USA.
    – O. Jones
    Jun 19, 2016 at 16:05
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    @Kevin Your unofficial, under the table wages?
    – Joe
    Jun 21, 2016 at 14:17

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.

  • There's actually a possibility that they'll be forgiving student loans if enough students stop paying. Taxpayers will bailout students and some of my economist friends have told me that this is already being discussed by the WH and others. This would help stimulate economic growth, so the OP and others would never have to repay. In the long run, they may be the smart ones. Jun 20, 2016 at 19:09
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    @user541852587 My answer focuses on not paying payroll and income taxes and resulting IRS penalties. It is never smart to skip paying taxes; ever.
    – quid
    Jun 20, 2016 at 19:21
  • @user541852587 I am unsure if this comment is satire or not. It is very risky to bet that political leaders will vote to subsidize close to $1 trillion within a time frame that the negative consequences of avoiding payment wouldn't hurt you. If a large number of people default on their student loans, then banks/government will begin being more selective about who they give loans to. Also, that $1 trillion didn't come from a magic vault somewhere. It is paid for through bonds and other investments, that if defaulted upon would cause serious financial problems, just like defaults on housing did. Jul 8, 2016 at 15:43

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.

  • I thought the number was 40 quarters for social security
    – JohnFx
    Jun 19, 2016 at 14:27
  • @JohnFx: There are two thresholds in play, one to get anything at all, and one to get the maximum benefit. Which do you think the 40 quarters is?
    – Ben Voigt
    Jun 20, 2016 at 2:16
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    Yes, the long-time under the table paid person I know is under the 16-quarter limit.
    – O. Jones
    Jun 20, 2016 at 11:39
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    I do think it's a bad thing. It's had the unintended consequence of a massive escalation in tuition and fees. It makes the lenders -- government and private -- lazy, so they don't pay as much attention to whether the education bought with lifelong debt is worth enough to pay off the debt.
    – O. Jones
    Jun 20, 2016 at 20:54
  • 1
    @Joe: Ahh, the 40 quarters threshold is for permanent eligibilty for Social Security Disability Insurance.
    – Ben Voigt
    May 27, 2017 at 18:16

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:

  • defer the loan as long as possible
  • no penalties/fees
  • make sure moneywise the interest you are paying on it is the least costly of your options
  • my personal suggestion - if you get a deferment try to save up at least 6 months of payments before you start paying

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