Imagine this: you’re lounging around at home one weekend day when you hear a knock on your door. Outside are seven armed U.S. Marshals waiting to take you to prison. But you’re not a criminal. You haven’t done anything wrong — except for not paying your student loans. But really, can you go to jail for not paying off your student loans?
These incidents have been reported in the news. In 2016, for instance, a Texas man claimed he was arrested and then forced by a judge to sign a repayment plan for a $1,500 bill from 1987, according to Houston Fox 26 News.
While it may seem implausible that someone would be carted away to jail for not paying up, these stories have many student loan debt holders asking, ‘Can you get arrested for not paying student loans?” The short answer is no, not exactly.
According to the U.S. Department of Education, you can’t be arrested for simply failing to pay your student loans.
In the case of the Texas man arrested for his $1,500 worth of student loan debt, the timeline was not in his favor. The loan originated in 1987, meaning he was well past the 270 to 360 day mark to keep his loan from defaulting. Failure to pay collection agencies for nearly 30 years means the collections agency was well within its right to sue him. According to Consumerist, it was when the collections agency sued the Texas debtor and he failed to appear in court that a judge ordered a bench warrant for his arrest.
Plus, if police were really coming after debtors, shouldn’t more people be in jail? In the first quarter of 2019, outstanding student loan debt totaled $1.49 trillion, according to the Federal Reserve Bank of New York. In total, 44.7 million Americans have student loan debt, and 11.5% of student loans are delinquent for 90 days or more or in default.
While you won’t be arrested for simply failing to pay your student loans, you will face penalties. If you fall behind on your payments, Department of Education loan servicers typically will try to contact you for almost a year. Borrowers who are located are informed of their repayment options and the consequences of defaulting. Do note, student loans granted under the William D. Ford Federal Direct Loan Program and the Federal Family Education Loan Program go into default if you don’t make payments for at least 270 days.
When a default happens, the Department of Education works to establish a repayment plan. If that is unsuccessful, other collection methods are employed. If all collection attempts fail, the agency is required by law to turn your debt over to the Department of Justice. Less than a tenth of 1% (0.001) of student loan cases end up in litigation, according to the Department of Education. Even if that happens, you won’t be arrested.
If you go into default, the consequences can be severe though. Some outcomes might include:
- Having your default reported to credit bureaus
- Having your tax refunds and federal benefit payments withheld and applied to your loan payments
- Having your wages garnished (i.e., your employer might be required to withhold a portion of your paycheck to send your loan holder)
- Having your loan holder take you to court
Owing money toward students loans can be stressful — especially if you’re having trouble keeping up with payments and your student loan debt ends up in collections. You are required to repay your obligation, but you should be treated with respect throughout the process.
If you owe student loan money, a debt collector might be tasked with getting you to pay up. You are responsible for repaying the loan, but they are required to behave in a professional manner.
Under the terms of the Fair Debt Collection Practices Act, it is illegal for debt collectors to engage in abusive, unfair or deceptive practices.
If you feel like you’re being harassed by a debt collector, you can report them to the following agencies:
- Your state attorney general’s office
- The Federal Trade Commission
- The Consumer Financial Protection Bureau
If you are behind on your student loan payments, you have ways to avoid a costly court case.
The first step is a phone call to your lender. No matter how late your payment is, your best bet is to call your student loan servicer and explain your situation. Yes, making the first move can be worrying — even scary — but it is also the best way to avoid a much harsher penalty.
Luckily, the federal government offers student loan debt holders ways to return a delinquent debt (less than 270 days past due) back to current. The easiest way is to make your missed payments and pay any late or processing fees.
However, there are also circumstances in which you may have missed your payments due to financial hardships like losing a job or a medical emergency. In these cases, talk with your federal loan servicer about options such as deferment or forbearance. Getting a deferment or forbearance doesn’t cancel your loan or the money you owe, but these options can postpone or reduce your payments based on your situation.
For defaulted loans, you may qualify for a student loan rehabilitation program in which you set up a new payment through the Department of Education. Once you have made three voluntary, on-time, consecutive payments, you can additionally apply to consolidate your loans.
For the Texas man arrested for student loan debt, his story isn’t exactly as straightforward as headlines reported. In his case, it wasn’t missing a payment or avoiding the collection companies that landed him in jail. His arrest was sparked by avoiding a court order after nearly three decades of not making an effort to pay.
If your loan is currently delinquent, in default or being handled by a collection agency, you cannot be arrested for the outstanding debt. However, you should still act quickly to rectify the situation and prevent future financial problems.
Create your own “get out of jail” card by contacting your lender today to potentially avoid the most extreme penalties.
Laura Woods contributed to this report.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.47% APR (with Auto Pay) to 7.59% APR (with Auto Pay). Variable rate loan rates range from 2.27% APR (with Auto Pay) to 6.89% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of August 15, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/15/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for SoFi.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.37% effective July 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.27% – 6.89%1||Undergrad & Graduate|
|2.27% – 7.55%2||Undergrad & Graduate|
|2.43% – 6.65%3||Undergrad & Graduate|
|2.24% – 6.67%4||Undergrad & Graduate|
|2.37% – 7.95%5||Undergrad & Graduate|
|2.46% – 9.24%6||Undergrad & Graduate|