Can You Go to Jail for Not Paying Student Loans? Complete Guide
Debt from student loans is among of the most prevalent financial problems in America. With more than $1.7 trillion of outstanding student loans many borrowers struggle to pay their bills. Naturally, many are wondering what happens if you be in jail for not paying off student loans?
The simple answer is that you can’t be in jail just for not paying back your student loans. However, neglecting your loans completely could lead to severe legal and financial consequences which could put you in the courts. Here’s how it all is done.
Debtors’ Prisons Are Illegal — But Consequences Still Exist
The United States, debtors’ prisons were banned during the 19th century and the law of today protects individuals from being imprisoned for debts that are private. Federal law specifically prohibits jail time for failure to pay civil debts, such as medical bills, credit card debts and student loans.
In other words, if you fall behind on your private or federal student loans, you’ll not be detained or taken to jail because you are in debt. But, this does not mean you have to pay the debt because the lenders and the government are equipped with the power to collect the money due.
What Really Happens If You Stop Paying
When you cease making your student loan payments, your loan goes into default -usually following:
- for 270 days of non-payment for Federal student loans
- for 120 days for the majority of private loans.
After that, a variety of events can happen:
- Wage garnishment: Governments across the country has the power to automatically garnish a portion of your salary without court orders.
- Tax Refund as well as Social Security Seizure Tax refunds, or even a portion from your Social Security benefits could be seized.
- credit damage: Insolvency can drastically reduce credit scores, making it more difficult to get a loan, rent or purchase a home.
- Charges for Collection: There is a chance that you owe penalties and interest which can increase the amount of your debt substantially.
Private student loans the lender must be able to sue you in civil court for the purpose of collecting. If they prevail they may garnish your wages or put lien on your property. However, none of these actions will result in the possibility of jail time.
The Exception: Court Orders and Contempt
Although you won’t be imprisoned for not paying your student loan but you could face prison if you don’t follow any court order related to these loans.
Here’s how it could happen:
- A private lender can sue you for loans that are not paid.
- A court issue a judgement that requires you to attend an hearing or present financial documents.
- You do not appear or you ignore a court order.
In such a instance, the judge could issue the bench warrant for your arrest, not because you failed to pay for the loan but rather for contempt of the court. It’s not often however it has occurred in a few states where people ignored court summons repeatedly.
In fact you’re not in jail by the student loan debt but you’re in jail for not obeying an order of a court that is connected to the debt.
Federal vs. Private Student Loans
The distinction between private and federal loans is important:
- Federal Student Loans They are repaid from the Department of Education through programs such as wage garnishment or Treasury offsets. Jail is not a part of the process.
- Student loans for private students: Collected through lawsuits filed by private lenders. If you are willing to cooperate with the legal process, you won’t risk arrest. If you ignore the court case completely, it could lead to legal consequences.
Whatever the case, both kinds of debts can be a financial burden for a long time as student loans aren’t to be discharged in bankruptcy, unless there is severe hardship.
How to Avoid Default and Legal Trouble
In the event that you are struggling to pay the bills do not wait until your loans become in default. There are legitimate options to stay clear of the repercussions:
- income-driven Repayment (IDR) Plan: For federal loans the amount of payments are reduced according to your income, which can be as just as low as $0 per day.
- Debt Reduction or In-Past Payment: It is possible to temporarily suspend payments in the event of economic hardship unemployment, or medical reasons.
- Refinancing or Loan Consolidation: These options can make payments easier or reduce the interest rate.
- communication: Always respond to notices from court and lenders. The silence of a lender can turn situations into legal problems.
Final Thoughts
What if you had to be incarcerated for not paying the student loan? Not for the debt in itself. In the U.S. does not imprison those who fail to pay their education dues. But, not paying your debts or court orders could lead to legal issues that could put you in danger.
The main takeaway is Communicate, collaborate and seek assistance early. There are forgiveness and repayment alternatives available, specifically with federal-backed loans. Failure to pay could damage your finances or credit score however it shouldn’t put you in jail — unless an unimportant legal matter grow into a bigger problem because of negligence.
