Student loans can come from a variety of sources, and unless you fall under a student loan forgiveness program or repayment program in exchange for service, you are generally expected to pay them back. If you do not pay back your loans, you will endanger your credit score, your ability to take out a mortgage or a car loan, and you may be forced into bankruptcy.
Federally Guaranteed Student Loans
If your loan comes under a federally guaranteed student loan program, such as Sallie Mae (more formally referred to as SLMA, or the Student Loan Marketing Organization), it generally cannot be discharged in bankruptcy. If you do declare bankruptcy, you will probably still owe your student loan balance. Courts have made exceptions where the petitioner has shown that continuing to collect the debt would put an "undue hardship" on the borrower and his family.
Collection on Federally Guaranteed Loans
If you default on a federally guaranteed loan, the loan company can go back to the government to make payment on your behalf. If this happens, you will owe a debt to the U.S. government, and the IRS will act as collection agent. They can withhold your tax refund, and even levy you bank account or have your wages garnished. Unlike other creditors, the IRS does not need a court order to do this, though you will be notified of any impending levies or garnishments via mail and phone. In some cases, states can revoke professional licenses if you are in default on a guaranteed student loan.
Non-guaranteed Loans
Student loans that are not guaranteed by the federal government may, in some circumstances, be discharged through bankruptcy. If you cannot pay the loans, you may be able to qualify for Chapter 7, which is a liquidation bankruptcy, or Chapter 13, which will cease the collection effort and allow you to make payments on the debt. Short of bankruptcy, however, you may get sued for the balance. If you are sued, and the creditor wins a judgment against you, they can enforce that judgment by placing a lien on your property, or by getting a court order to garnish your wages.
Alternatives
Many employers, including the U.S. government, offer student loan forgiveness or repayment programs. Typically you must agree to a period of service -- either on a volunteer basis or as an employee -- in order to qualify for the repayment program. Prominent employers that feature student loan repayment programs include the U.S. Military, Teach For America and the Peace Corps.
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