How should I deal with a University debt?

by Ashley

The university I attended for a semester back in 2007 is now demanding payment on the account of nearly $11,000. At least 2-3 thousand of this amount is due to finance charges from my refusal to pay for years. I never made enough money to begin monthly payments until this past year, and I have been fighting with negotiating with them.
I recently got a letter that they want to start collecting, otherwise they will hand it over to the Illinois State Offset System. I am wondering just how 'bad' this will be if they do, since I can't find much information online. The school is not willing to negotiate or reasonably settle at the moment.
My main concern is if it is handed over to the state to collect that this debt will show on my credit report. As of right now, I do not think the school has reported it. I don't really want an $11,000 debt on my credit. Also, aside from eventually taking me to court to garnish my wages, what happens when this sort of debt is handed off to the state? I live in Texas now, not the same state as the debt I owe. How do cases like these usually go, what would I have to worry about, and is it better to try and keep dealing with the school or tell them to go ahead and hand it over?

Comments for How should I deal with a University debt?

Click here to add your own comments

Jan 05, 2012
How should I deal with a University debt?


You did not indicate if the loan is federally guaranteed. If it is, the debt is going to show up on your credit report sooner or later and at some point, your wages may be garnished and your tax refunds intercepted (taken). By the way, if your loan is federally guaranteed, then your wages can be taken without your being sued. Also, the State of Texas does not allow wage garnishment for most kinds of debt, but garnishment is permitted to collect past due federal student loans.

If you had contacted the lender sooner about your past due debt -- before you defaulted on it -- you could have probably avoided being in your current situation by negotiating a more affordable payment plan with the lender or even qualifying for forbearance, which would have allowed you not to pay on the loan at all for a period of time. However, those options are no longer available to you. In fact, at this point, you have few if any options for avoiding garnishment or the interception of your tax refunds, assuming again that the loan is federally guaranteed. Meanwhile, until your loan is paid in full, you will be charged interest and penalties.

If the loan is a private loan, you may have more leeway to work something out with the lender -- set up a payment plan you can afford, for example. But I would get in touch with the lender immediately to explore your options. Waiting is only going to make your situation grow worse.

If the lender refuses to work with you at this point or if all of the options the lender offers you are unaffordable and your loan is a private loan, you may want to talk with a bankruptcy attorney about getting rid of the debt through bankruptcy. (Note: Bankruptcy does not wipe of federal student loans.) However, the bankruptcy will appear on your credit history.

Bottom line, at this point, there is probably very little you can do to avoid having your credit history badly damaged by the money you owe. Therefore, you should do everything you can to try to resolve the debt one way or another as quickly as you can so that you can begin rebuilding your credit sooner rather than later. Not dealing with your debt is working against you.

Jan 05, 2012
More info
by: Ashley

I am not familiar with the laws of IL and so I do not know if the money that you owe to the university is considered a loan or not, even though technically you did not apply for a loan. I do know that the debt will show up in your credit histories sooner or later assuming it's not already there (If I were you, I would check your credit histories.) and that if you are not able to work out a way to pay it, you will probably be sued for the money you owe, esp. given the size of your debt. Furthermore, if you are sued and there is a judgment against you, the university may have legal means of collecting on the judgment despite the fact that you now live in Texas. Also, having a judgment against you will be very damaging to your credit history and will make it difficult if not impossible to get credit and may interfere in your ability to get a responsible job, rent a place to live and/or get adequate insurance.

My best advice to you at this point is to consult with a bankruptcy attorney right away, a free initial evaluation with a bankruptcy attorney Filing for bankruptcy will stop any efforts to collect from you and give you an opportunity to decide what to do about the debt you owe. It's possible that bankruptcy may wipe out the debt, but I am not sure. That is something that an attorney would have to determine. Of course, filing for bankruptcy will also damage your credit history, but as far as I can tell, you are in a no-win situation at this point. Either your credit history has already been damaged or it will be soon. The quicker you can resolve your problem, the better off you will be. In the meantime, I recommend you learn about bankruptcy, how to file for bankruptcy.

Click here to add your own comments

Return to Debt Collection Questions.

Learn how debt collection laws can help you!
This website does not provide legal advice.
All information is for educational purposes only.
Copyright 2007 - 2021 by Mary Reed and Gerri Detweiler.
All rights reserved..
Read our Privacy Policy here. Do not sell my information.