Money Minute: What happens if you don’t pay your student loan bill?

I get it– if I had to choose between keeping a roof over my head or keeping student lenders happy, the roof would win every time.

But ignoring your student loan bills can have serious long-term consequences.

Your credit score will tank. Once your payment is 45-90 days late, it will go on your credit report. There’s no easy to way to predict how much your credit score will drop. But trust me, it won’t be pretty. A low credit score will make it harder for you to get approved for new lines of credit. It can even make it hard to get a job.

You could wind up in default. If you miss payments for more than 270 days, your loan will move out of the delinquency phase and into default. Default is serious business. In most cases, once your loan goes into default, your lender will ask for the unpaid balance in full and oftentimes it will be passed along to a collections agency. If you let federal student loans go into default, you maylose the privilege of applying for income-based repayment, deferrment or foreberance, which can be a major blow. A defaulted loan can also hurt your credit score much more than a delinquent loan, making it difficult to get approved for any new credit (auto loans, mortgages, you name it), a cell phone plan, or even get a job.

Once youre in default, the real problems begin..

You may never get a tax refund again. Private lenders can’t dip into your tax refunds, but if you default on federal loan payments, Uncle Sam sure can. If you file taxes jointly with your spouse, that means their refund is at risk, too. There’s no limit to how many years they can wait to take it either.

Your wages could be garnished. The federal government can take up to 15% of your income if you default on student loans. If you’re retired, they can garnish your Social Security benefits, too. Private lenders can garnish your wages, too, but they have to take you to court first. You can hire an attorney to fight it, but of course that will cost you.

Your cosigner will be screwed. If someone cosigned your loan, they also suffer the consequences for late payments. Credit damage, wage garnishment, lawsuits, you name it. You can try to remove them as a cosigner but if the loan is already in default (when payments are more than 270 days past due), it’s near impossible.