There are very harsh consequences of default on federal student loans. The government has extraordinary power to collect student loans and charge very large collection fees. Most crimes can only be prosecuted for limited periods of time, but there is no time limit for collection on federal student loans..
The three most common government collection tools, Tax Refund Offsets, Administrative Wage Garnishment, and Federal Benefits Offsets, all occur outside of court. It is less common for the government to sue to collect on student loans because it has so many tools to use outside of court. Still, litigation is an additional collection power and the government does use it sometimes.
There may be other consequences of student loan default depending on the type of loan and where you live. For example, a number of states allow professional and vocational boards to refuse to certify, certify with restrictions, suspend or revoke a member’s professional or vocational license and, in some cases, impose a fine, when a member defaults on student loans. The state laws apply to members of the various professions working in that state. Some of these states’ provisions apply to particular professions or vocations such as attorneys, health care professionals, teachers, insurance professionals, state officers, and commercial fishermen. Others apply more generally to anyone whose profession or vocation requires licensing. You should check the laws in your state for more information.
Tax Refund Offsets Wage Garnishments Federal Benefits Offsets Lawsuits