You don't have to pay your student loans if you don't want to (2025 update)
What happens if you don’t pay student loans? Some consequences are dire, but not making a $400 monthly payment has real benefits, too.
Updated for 2025: We’ve known for a while that Republicans have student debt relief in their crosshairs. Republican states challenged Biden’s attempts at broad forgiveness and affordable repayment, Trump eliminated borrower protections and bungled Public Service Loan Forgiveness during his first term, and conservatives’ Project 2025 proposes no less tomfoolery than eliminating the Department of Education (ED).
This is nothing new. Ronald Reagan first tried to eliminate the then-brand-new Department of Education during his fateful reign. Student debt relief, in particular, has experienced a tug of war between Republican and Democratic control of the presidency and legislature.1 But borrowers have experienced severe whiplash over the past five years with federal loan policies, so it seems time to update this early Healthy Rich post, originally published (with such hope!) in 2021.
Next to our affordable-housing crisis, student debt defines the millennial (and soon, the zoomer) financial condition. So much financial advice for us is about managing these twin burdens with our ever-shrinking resources.
I’ve written a lot of that advice in my decade of covering personal finance, and I originally wrote this post to address an important reality it always ignored: Many of us are unconcerned with what our student debt means for our financial goals or creditworthiness over the next 10 or 20 years. We’re concerned with how a $400 monthly bill affects us right now.
I wrote this post to share a message I didn’t think borrowers were hearing enough: You don’t have to repay your student loans if you don’t want to.
With the relief options that have been built into those loans, our eagerness to repay the debt is largely influenced by an anti-debt bias in our culture, and it’s important to combat that. But in our current environment, those relief options are precarious. So I’m addressing student loan debt a little less glibly these days, and I’m updating all of the information below with what we know about student loan repayment in 2025.
Why people say you should pay your student loans
Smart people argue for repaying student loans (and any debt) as quickly as possible to reduce how much you pay in interest — and also simply to not have debt.
A lot of people hate debt. I come from a pragmatic Midwestern family of the 90s, and, my goodness, you can hardly do worse than accruing debt in that environment.
That’s because having — and especially not paying — debt affects your credit score, which affects that cornerstone of the American Dream: home ownership. Bad credit keeps you from getting a mortgage. At best, it means anything you finance will cost more than it would with good credit, and that’s just plain impractical to folks who hate debt.
Reasons to not pay your student loans
Getting out of debt sounds nice, and it certainly feels nice, too. But not making that monthly payment sounds pretty nice, too.
The main reason you probably don’t want to repay your student loans is to keep that extra money in your pocket each month. You can do a lot with a few hundred bucks.
Achieve financial goals
Lots of financial experts point out more optimized ways to use your money than paying off student loans as quickly as possible. They say you could:
Invest: If you have money to spare and investing could help you earn 7% on it, paying down your student loans to avoid paying 6% doesn’t add up. There’s a lot of math to do there, so I’m taking the experts’ word for it.
Pay off higher-interest debt: Same math-y stuff here. Credit cards, auto loans or personal loans probably charge more in interest than your student loans, so you pay less over time if you pay those off first.
Contribute to retirement: This falls under investing, too, because retirement savings can earn money the same way. The argument is even stronger if you’re among the rare workers with an employer match that could double your money before it’s invested.
Improve your standard of living
A lesser-made argument: You could enjoy life more by spending that money.
Not making your student loan payment means more money in your pocket now — who’s worried about future debt? You could die tomorrow, and you might skip a latte today because some financial guru told you to?
Not making a student loan payment could mean more resources available each month to take care of yourself through things like:
Higher rent: You could choose to live in a cheap house in central Wisconsin (heyyy!), but you might want the community and basic human rights protections that come with living in a city or state that happens to have a higher cost of living.
Pricier groceries: It would literally not be that difficult to spend your extra $400 on just eggs right now.
Gym membership (or running shoes or a bike, etc.): Staving off depression and anxiety takes a lot of work in these uncertain times. A little exercise might be your only relief, especially if therapy and medication are completely out of reach.
Nicer stuff: I’ve lived with a $12,000 annual income, and I’ve lived with a $100,000 income. I can attest to the psychological benefit of sometimes buying new clothes, the latest iPhone and a couch that doesn’t smell weird.
4 legitimate ways to not pay your student loans
The Department of Education has at times realized the ill-fated risk it assumes by doling out tens of thousands of dollars in debt to teenagers. Because some of our policymakers want to keep that debt from destroying our lives before they even begin, they’ve pushed through options to help us get out of paying.
Private lenders offer a few relief options, too, but that debt is way stickier. As long as they’re available, all but the wealthiest students have better future prospects with federal loans.
Here are some legitimate ways to eliminate or reduce the monthly cost of student loans.
Deferment & forbearance
Deferment and forbearance are types of temporary relief from your student loan payments. You have to apply and prove financial hardship to qualify. You’ll suspend monthly payments for a period in either case.
For federal loans, the distinction is:
Deferment: Interest won’t accrue on subsidized loans or Perkins loans. It’ll continue to accrue on other loans. Your loans are automatically deferred while you’re in school and for a six-month grace period after you leave.
Forbearance: Interest will continue to accrue on all your loans.
Most private lenders also offer that in-school and just-after-school deferment period, but your loans will accrue interest. Many also let you apply for forbearance later on, and some cool, fun lenders have alternatives like skipping payments once a year.
Your student loan servicer can tell you more about any of these options. For federal loans, find your servicer through the Federal Student Aid Office. For private loans, your original lender should be your servicer.
Note that if you’re working toward forgiveness of federal student loan debt (more on that below), months spent in deferment or forbearance don’t count count your forgiveness requirements, so your forgiveness date could be delayed.
Income-driven repayment
When you accept federal student loans, you initially agree to the standard repayment plan, which spreads monthly payments evenly over a 10-year (120-payment) period. It doesn’t consider your ability to afford payments.
You can apply for income-driven repayment if you can’t or don’t want to pay the standard amount each month. These plans limit your monthly payment based on your discretionary income.
Pay As You Earn (PAYE): Pay 10% of your discretionary income for 20 years.
Income-Based Repayment (IBR): Pay 10% or 15% for 20 or 25 years, respectively, depending on when you took out the loan.
Income-Contingent Repayment (ICR): Pay no more than 20% for 25 years.
Saving on a Valuable Education (SAVE): Implemented under Biden in August 2023, this plan was immediately met with challenges that put it on hold. About 8 million borrowers are enrolled, and our loans are in an interest-free forbearance until at least December 2025 while courts decide the plan’s fate. It would have drastically lowered payments and made more borrowers eligible for forgiveness — but the Trump administration is expected to let it die on the vine if it doesn’t survive legal challenges. (Check studentaid.gov/saveaction for updates from ED.)
Under IDR, your monthly payment could be as low as $0 — I’ve been there. That means you’ll technically stay current on payments without shelling over anything.
After the repayment term, your remaining balance is forgiven. (As of Feb. 2025: As part of the SAVE court actions, ED is prohibited from granting forgiveness under SAVE, PAYE or ICR, but IBR was created by a separate act of Congress and forgiveness is still being processed. You’ll be moved into interest-free forbearance if you reach the forgiveness milestone for PAYE or ICR during this hold.)
To enroll in PAYE or IBR, the monthly payment calculated has to be lower than your standard payment. ICR and SAVE don’t have that requirement; you just have to have eligible loans.
Student loan forgiveness & cancellation
The crème de la crème of not paying your student loans is to get the lender to tell you you don’t owe the money anymore. It usually takes a while, and qualification is particular, but here are your options for federal student loan forgiveness:
Public Service Loan Forgiveness: Work in government or nonprofits, and you could qualify to have your balance forgiven in about 10 years under this not-as-simple-as-it-sounds ED program. Teacher Loan Forgiveness is similar but quicker and harder to qualify for.
Cancellation and discharge: The government will forgive your loan balance for a bunch of other reasons, too, but it can be persnickety. If you’re disabled or die, or your school closes, you (or your heirs, who, yeah, inherit your debt) can look into this option.
Forgiveness under IDR: After your IDR repayment term, your remaining loan balance is forgiven. (See above re: court action and forgiveness eligibility.)
Bankruptcy for student loan debt
TL;DR: You’re not likely to be able to discharge student loans in bankruptcy. But it happens sometimes.
You could discharge federal and private student loan debt in bankruptcy if you can prove the payments present an “undue hardship.” Small detail, though: The law doesn’t define “undue hardship,” so the courts get to decide.
Most bankruptcy courts in the country determine your eligibility through the “Brunner” test, where you have to prove, as nonprofit debt-relief organization Upsolve explains:
Your circumstances are such that you can’t repay the loan and maintain a minimum standard of living.
These circumstances aren’t ending anytime soon.
You’ve made good faith efforts to repay the loan (even if you haven’t actually been able to make payments), such as inquiring about alternative payment plans.
More fun legal stuff: In the 1st Circuit (Maine, New Hampshire, Massachusetts and Rhode Island), courts haven’t set a standard for this definition. In the 8th Circuit (North and South Dakota, Nebraska, Minnesota, Iowa, Missouri and Arkansas), the test is similar to but slightly different from “Brunner.”
Wherever you live, a bankruptcy lawyer can help you sort through this stuff.
Bankruptcy could be a useful last resort to get private student loan payments off your back without fielding years of calls from debt collectors.
For federal loans, any circumstance that would qualify you for bankruptcy would usually qualify you for low or $0 payments under IDR, or for forbearance, which are easier to obtain, don’t involve any lawyers or courts, and won’t hurt your credit.
What happens if you don’t pay student loans?
Nothing is easy. You signed that promissory note after reading it about as closely as the latest updates to Apple’s terms of service, and you’re technically obligated to repay what felt like free money at the time. Not prioritizing repayment comes with consequences that you might or might not be interested in living with.
If you opt for an official path to non-payment (i.e. your lender or servicer is onboard), you’re looking at:
Accrued compounding interest: As long as you hold a balance on a loan, it’ll accrue interest (with a few exceptions). Suspending or reducing payments through deferment, forbearance or income-driven repayment extends the time the loan sits unpaid, accruing interest that balloons your balance way beyond what you originally borrowed (until it’s forgiven or repaid).
Total outstanding debt: That big chunk of debt shows up on your credit report and could affect your score. Scoring models don’t take student loan debt quite as seriously as other types, but a debt like $30,000 could make a mortgage lender think twice about handing you another heaping pile of long-term debt.
Federal tax on forgiven debt: The IRS taxes a discharged balance like income for that year, so plan ahead to avoid a surprise bill. This doesn’t apply to debt forgiven under PSLF or for school closure, and some provisions that are set to expire at the end of 2025 exempt debt forgiven due to disability as well as under IDR, according to the Tax Foundation.
If you totally ignore the debt and skip payments of your own accord, you could face some of the above, plus:
Late fees: Each missed monthly payment could result in a fee, which will be tacked on to your balance.
Delinquency and default: When you miss a payment, your loan becomes “delinquent” until you catch up. A delinquent loan can go into default if it remains unpaid for a period defined by the lender. That period is 270 days for most federal loans, but could be as soon as immediately. The entire balance of a defaulted loan becomes due at once.
Wage garnishment: Without taking you to court, the government can snatch your government benefits and tax refunds, as well as up to 15% of your disposable pay, to collect on defaulted federal loans.
Collections and lawsuits: Private lenders can hand your loan over to a debt collection agency, which may take you to court to collect on the loan. It could win the right to garnish your wages this way.
Effect on credit score: Lenders and servicers can report your loan delinquency or default to credit bureaus, which could be a serious knock on your credit score.
What are your priorities?
You’ve got a lot to consider to determine whether you’ll plan around that $400ish monthly payment or figure out how to avoid it.
I — you might guess — do what I can to avoid mine, mostly through IDR (though I spent many years before my personal-finance-writer days going the ignore-and-pray route).
I’ll likely have student loan debt basically forever, save for that pipe dream of a progressive government cancelling all of it for us.2
But I will not at any point miss out on traveling, stick with a high-paying job I hate, or opt for PC instead of Mac to accommodate student loan debt.
You might prioritize eliminating debt and avoiding interest. You might value a perfect credit score for the power to finance your future home, business, child’s education or boat. You might not want to prove your income to Aidvantage every year. You might feel duty-bound to return the favor the government paid your younger self.
Or maybe your biggest priority is to not have roommates when you’re 45.
What matters is that you know you have options — for as long as they exist, you should feel free to use them.
George W. Bush, for his part, was a rare Republican who supported public education and instituted the highly impactful Public Service Loan Forgiveness program during his presidency.
Yeah, I wrote this hopeful line in 2021 — still holding onto that dream!
It took me DECADES to un-internalize the myth that I was at fault for not being able to afford my student loan payments. For a large number of people like myself who took federal student loans out in the late 80s and through the 90s, those "small" loans ballooned into something huge and unpayable thanks to compound interest.
Not to mention: I had paid on my loans for 10 years, then refinanced. Navient did NOT tell me refinancing started my 20 year payment limit count clock over, so I in effect wiped out 10 years of on-time payments. And got more interest dumped on my principal amount to boot. We don't know what we don't know, and it didn't occur to me to ask about the payment clock. In the mid 2000s, when I refinanced, loan servicing was the Wild Wild West; I'm sure Navient buried that important fact in the reams of legalese I had to read, but it was never made clear before I signed on the dotted line.
After paying my loans for almost 30 years (which was supposedly NOT allowed in my promissory note by the way), Biden's administration finally set that wrong right and forgave them. I had paid almost double what I borrowed at that point, with no end in sight since Navient didn't give one shit about counting my payments or acknowledging that I had long ago paid off my original loan.
All of this to say: NO ONE should feel shame about the inability to pay student loans back. It's a rigged game. (And let's not even get started on PRIVATE loans. Please, if you have the ability to not take those out, don't. Mine wasn't forgivable even in death. At least my federal loans wouldn't have impacted my family if I got hit by a bus).
The vast majority of student loan borrowers want to pay their loans back, and do so. But not at the expense of living a life, having health insurance, etc. etc.
If you have to play a rigged game, at least don't feel badly about it. STRETCH those payments out as long as you can, run your payment clock out, and keep your chin up.
And this isn't political: no administration has taken this on and made it right for ALL borrowers.
I wish everyone the best with their student loan nightmare. Take good care.
I'm in my 60s so this article was enlightening from a different generation perspective. I have lots of medical debt that I really didn't sign up for. Perhaps you can provide ideas to not repay this debt?