Do your student loans feel like a financial black hole? Your payments disappear as fast as you make them, and your balance never seems to go down.
But no matter how much student loans have tripped up your finances, defaulting would only make the situation worse. If you were to stop paying your federal or private student loans, a number of bad consequences would follow.
Read on to learn what would happen if you stopped paying your student loans — plus what steps you can take instead.
1. Student loan default could destroy your credit score
If you stopped paying your student loans, your credit score would plummet. That’s because your credit score is based on on-time debt repayment, among other factors. “The negative credit impact of a default can be quite severe,” student loan lawyer Adam Minsky said.
Although a credit score might not feel important just out of college, it has a big effect on your life. For instance, a low credit score makes it difficult to get a credit card. You might not be able to take out another loan, such as a car loan or mortgage. Renting an apartment could be tough, too, because many landlords request credit checks.
“In some states, a student loan default can jeopardize professional licensure,” Minsky said. “Negative credit reporting can have secondary effects including difficulty obtaining housing or employment.”
Before defaulting on your loans, consider the consequences on your credit score. Not only will a poor credit score make life difficult, but it will also take years to build back up.