Private Student Loans: What Happens When You Fall Behind

Private student loans — from a bank, credit union, or a lender like Sallie Mae, Discover, or SoFi — get lumped in with federal student loans constantly, but the collection rules are almost completely different. The single most important thing to understand: a private lender has none of the federal government’s special collection powers. No administrative wage garnishment, no tax refund seizure, no touching your Social Security check without a lawsuit first. A private lender has to sue you and win a judgment before it can take anything — exactly like a credit card company or any other unsecured creditor.

That’s the good news. The harder news: private loans also don’t come with the federal safety net. No income-driven repayment plans, no Public Service Loan Forgiveness, no administrative rehabilitation program, and — until relatively recently — a reputation as nearly impossible to discharge in bankruptcy, which turns out to be more myth than rule today.

How is collection actually different from federal loans?

	Federal student loans	Private student loans
Can they garnish wages without suing you?	Yes, up to 15% administratively	No — they must sue and win a judgment first, same as any unsecured creditor
Tax refund / Social Security offset?	Yes, without a court order	No — not available to private lenders
Standard forgiveness/relief programs?	Income-driven repayment, PSLF, rehabilitation	Generally none — relief is whatever the lender chooses to offer
Statute of limitations on suing you	Effectively none — the government’s collection authority doesn’t expire the way private lawsuits do	Set by your state, same as any written contract — see your state’s page
Cosigner exposure	Rare — most federal loans don’t require one	Common — a cosigner is equally on the hook and can be sued or reported right alongside you

Because a private lender has to actually sue you, everything covered in the lawsuit-filed and default judgment guides applies directly here — respond to a summons on a private student loan exactly like you would for a credit card lawsuit. Ignoring it risks a default judgment, which then opens the door to a wage garnishment order or a bank levy the same way any other judgment debt does.

What happens when you fall behind?

There’s no uniform federal default trigger — it depends entirely on your loan agreement, though most private lenders consider a loan in default somewhere between 90 and 120 days of nonpayment, sometimes sooner. Once in default, the account can be accelerated (the full remaining balance becomes due at once), reported to the credit bureaus as delinquent, handed to an in-house collections team, or sold to a third-party debt buyer — again, functionally identical to what happens with an unpaid credit card.

If you have a cosigner, they’re exposed the entire time you are — a private lender can pursue the cosigner for the full balance regardless of who actually made payments, and a cosigner’s credit takes the same hit yours does.

Can private student loans actually be discharged in bankruptcy?

Yes — and this is one of the more persistently wrong pieces of conventional wisdom out there. Like federal loans, private student loans require proving “undue hardship” in a separate legal proceeding within your bankruptcy case rather than discharging automatically like ordinary dischargeable debt, but courts across the country have grown more willing to find undue hardship in genuine cases in recent years. It’s a real legal process with a real burden of proof, not automatic — but “student loans can never be discharged” has never been fully true, for federal or private loans. See Chapter 7 vs. Chapter 13 and the Chapter 7 means test estimator for the rest of the filing.

What are my actual options if I’m behind?

• Contact the lender before you default, not after. Private lenders vary enormously in what they’ll offer — some have hardship forbearance or modified payment programs, but none of it is guaranteed by law the way federal income-driven repayment is, so you have to actually ask.
• Refinancing with a different private lender can lower your rate or extend your term if your credit still qualifies, though refinancing a federal loan into a private one gives up all federal protections permanently — a decision worth thinking through carefully, not something to do reflexively. See refinance now or wait for how to actually run that math, including where private refinance rates stand right now.
• If you’re sued, respond by the deadline. This is the single highest-stakes difference from federal loans: a private lender’s only path to garnishment or a bank levy runs through a lawsuit, which means responding on time is what stands between you and a default judgment. See the lawsuit-filed-summons guide.
• Check who actually owns the debt before agreeing to anything — private student loan debt gets sold like any other unsecured debt, and this site’s complaint lookup tool and company directory can help confirm who you’re actually dealing with.

Questions & Answers

Can a private student loan lender garnish my wages without suing me?

No. Unlike the Department of Education, a private lender has no administrative garnishment authority. They have to sue you in court and win a judgment first — the same process as any ordinary unsecured debt.

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— US Debt Compass Editorial Team

Is my cosigner responsible if I stop paying?

Yes, fully. A cosigner is equally liable for the entire balance, not just a portion, and the lender can pursue them directly regardless of who made past payments.

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— US Debt Compass Editorial Team

Can private student loans really be wiped out in bankruptcy?

Yes, though it requires proving "undue hardship" in a separate legal process — not an automatic discharge. It's become more achievable in recent years as courts have grown more willing to find genuine hardship, but it's still a real legal hurdle, not a guarantee.

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— US Debt Compass Editorial Team

Is there a deadline for a private lender to sue me?

Yes — your state's ordinary statute of limitations for a written contract applies, generally 3 to 6 years depending on the state. See the [statute of limitations glossary entry](/glossary/statute-of-limitations), [Statute of Limitations Expiration](/situations/statute-of-limitations-expiration) if you think an old balance is past it, and your [state's page](/states) for the specific number where you live.

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— US Debt Compass Editorial Team