It can feel like a dark cloud is hanging over your financial future when you have student loans. You took them out with good intentions—to get an education and make more money—but now you’re worried about what will happen if you can’t pay them back. For example, if you don’t pay, could your student loans take your house?
It’s a troubling thought. Your home is probably the most valuable thing you own, and it would be terrible to lose it. Luckily, there are some safeguards in place to protect people who have student loans. Not paying your student loans is never a good idea, but it won’t cause you to lose your house by itself. Default, on the other hand, could put your home at risk if it is not handled properly.
This article will explain when and how student loans could make it impossible for you to own a home, along with ways to avoid the worst-case scenarios.
How Student Loans Are Structured
To understand if student loans can take your house, you first need to know what type of debt student loans are categorized as. Student loans are considered unsecured debt. This means they are not tied to any type of collateral.
Secured debts, like mortgages and auto loans, are tied to assets; the house or car is used as security for the loan. If you don’t pay a secured debt, the lender can take the collateral.
Unsecured debt has no direct tie to an asset, so non-payment does not immediately give the lender any claim over your property. Other examples of unsecured debt include credit cards, medical bills, and personal loans.
So on their own, student loans cannot put your home at risk. To threaten your home ownership, a series of events would have to occur:
- You stop making payments and default on the student loans
- The loans are sent to collections
- The collections agency sues you and wins a legal judgement
- The judgement allows the agency to put a lien on your home
As you can see, there are many steps between defaulting on student loans and actually losing your home. But it’s still a possibility if you let student loan debt spiral out of control.
When Student Loans Default
Default occurs when you are delinquent on student loan payments for 270 days or more. At this point, the loan will be transferred to a debt collection agency.
Once in default, you lose access to many helpful programs:
- Income-driven repayment plans
- Deferments and forbearances
- Federal loan forgiveness programs
You also become ineligible for additional federal student aid. The entire loan balance will be due immediately and collection fees can be added.
Most critically, default paves the way for lawsuits and wage garnishment. For federal loans, collections tools like Social Security offsets and tax refund seizure will be utilized first. But if those avenues fail to recover the money, then legal action can proceed.
From Judgement to Lien
To get a lien on your home, the collection agency has to take you to court and win a legal judgement. If you do not respond to the lawsuit or show up to the hearing, the agency will most likely win by default.
Once a judgement is issued, the agency can start seizing assets. First they will go after non-exempt assets like bank accounts, investment accounts, and tax refunds. If you live in a state that allows wage garnishment, they can have money taken directly from your paycheck.
If you still don’t pay after the judgement, then the agency can place a lien on your home. At this point, foreclosure becomes a real possibility if you cannot satisfy the lien.
Tips to Protect Your Home From Student Loans
The thought of losing your home to student loans is scary. Here are some tips to make sure it doesn’t happen:
-
Stay out of default. Work with your servicer to find an affordable payment plan and always apply for deferment or forbearance if you need a temporary break.
-
Respond to lawsuits promptly. If you are sued, be sure to reply within the specified time frame and show up to any court hearings. Judges tend to be more sympathetic to borrowers who actively participate in the process.
-
Consider refinancing. If your income has increased since you took out the loans, you may be able to refinance to a lower rate and more manageable payment. Make sure to pick a reputable lender and read the fine print.
-
Explore settlement. In some cases, collections agencies will agree to settle debt for a fraction of what is owed. This can satisfy a lien and stop foreclosure proceedings.
-
Seek legal help. An attorney experienced in student loan law may be able to help you navigate the bankruptcy or judgement/lien process.
Losing your home is the worst case scenario. But being proactive with student loan debt can help you avoid ever getting to that point. Reach out for help early and know there are always options to resolve student loan issues, even in default. While stressful, this situation can be managed with proper planning.
Options if student loans put a lien on your home
You have four options if student loans have a lien on your home:
- Negotiate a payoff. Depending on your financial situation, you may be able to offer the loan holder a lump sum payment to remove the lien from your property. Contact the law firm that sued you and ask them about your settlement options. It’s not uncommon to negotiate a settlement for 50% of the current loan balance paid in a lump sum.
- File student loan bankruptcy. By itself, filing a Chapter 7 or Chapter 13 bankruptcy won’t remove the lien. You’ll need to open a bankruptcy case and then file an adversary proceeding asking the court to get rid of your student loan debt and the judgment. You may be able to do the same thing even if you’ve already filed for bankruptcy.
- Ask to pay the lien at closing. If you’re trying to refinance your home, ask the creditor if it’s willing to lift the lien so you can close. This option is a long shot. But you have nothing to lose.
- Try to set aside the judgment. If you don’t remember being sued, find out where the lawsuit was filed at. Contact a lawyer near that location to find out the rules for setting aside the judgment. Depending on how long it’s been since the court entered the order, you may be able to show the judge you didn’t have a chance to defend yourself.
Can student loans take your house?
Lenders offer two types of loans: secured loans and unsecured loans. A secured loan is tied to property like a house or a car. If you miss your mortgage payments, not only can the bank put derogatory marks on your credit report, but it may also foreclose on your home.
An unsecured loan is entirely different. It’s not backed by any property. When you fall behind on payments, there’s no property for the lender to take. The bank has to sue you and get an order from a judge before taking any of your property.
Student loans are unsecured loans. As a result, student loans can’t take your house if you make your payments on time. However, if you miss enough student loan payments, your accounts will first move into delinquency status and then into default status. Once you default on student loans, you’re at risk of having your house taken to pay them back.
Can a Student Loan Put a Lien On My Home?
FAQ
Can they take your house for student loan debt?
Student loans are unsecured loans. As a result, student loans can’t take your house if you make your payments on time. Apr 29, 2025.
What happens if you never pay off your student loans?
If you never pay off your student loans, several negative consequences can occur, including damage to your credit score, potential wage garnishment, and even legal action from your lender or a collection agency.
Can assets be seized for student loans?
Student loans are a form of unsecured debt not backed by collateral. So, your home or car cannot be seized if you fail to make payments. Feb 17, 2025.
How do I protect my assets from student loans?
Put Your Assets in a Trust A trust can protect your assets that are included in the trust from going to anyone who is not named in the trust, and those assets cannot be used to pay your creditors.