Student Loan in Default

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If you have a student loan in default we probably don’t have to tell you that dealing with student loan debt collectors can be stressful and confusing. Student loans can be one of the most difficult types of debt to resolve. But there are programs and options that may help. 

Federal Student Loan Default

If you owe federal student loans and you have one or more of these loans in default, the federal government can:

  • Seize your tax refund (including a joint tax refund if you are married and file jointly);
  • Garnish your wages without taking you to court first;
  • Take part of your federal benefits such as Social Security or Social Security disability payments (called "offset");
  • Suspend certain types of professional licenses (attorney, healthcare worker, for example).

In addition, if your student loans go into default you may be charged collection fees of up to 20%! Those fees will make it very hard to get back on track since a good portion of your payments on the loans will be going toward the fees.

Even worse, there is no statute of limitations for collecting student loans. That means lenders or debt collectors can come after you for your past due loans for many years to come. And it's extremely difficult to discharge the loans in bankruptcy.

All of this together means that when it comes to student loans, you can run, but you can't hide. If you have fallen behind on yours, you'll want to look into all of your options for getting the loans out of default.

Private Student Loan Default

If you owe private student loans, debt collectors don't have quite the same powers that they do when it comes to federal student loans.

With private student loans, there is a limit on the number of years the collection agency or lender has to sue you over the unpaid debt. This is called the statute of limitations and it varies by state, though six years is typical in many states.

In addition, private student loan lenders cannot seize your assets or property without suing you and getting a court judgment first. And, state law limits exactly what they can go after if they win a judgment.

At the same time however, federal student loans offer some benefits that private student loans don’t. For example, if your federal student loan payments are too high, you may be able to get them lowered under the Pay As You Earn program or Income Based Repayment. There are even some circumstances where your federal student loans may be cancelled (if you become disabled, die, or work in certain professions such as teaching or health care). Those options usually aren’t available with private loans.

Important: All third-party collectors that collect student loans must follow the Fair Debt Collection Practices Act when trying to collect from you. That’s why it is important that you know your rights when talking with debt collectors.

Getting Out of Student Loan Collection Hell

It is not always easy to resolve student loans that are in collections. If you have student loans in default or that you've fallen behind on, you’ll probably have to become very dogged about exploring all of your options. These may include student loan cancellation, Income-Based Repayment (which can lower your payments to as little as zero based on your income), or loan rehabilitation (which brings your loans current after 9 or 12 on-time payments), just to name a few.

Get Help With Your Student Loans Now

Below, we list several websites and resources that provide helpful, in-depth information on how to resolve your student loan debt yourself. Unfortunately, we've heard from too many borrowers who simply can't manage to do it themselves. They are finding it impossible to figure out what they owe, or they are getting the runaround when they try to get into an affordable repayment plan.

If you are in this situation and find that you simply cannot resolve your debt problems on your own, you may want to talk with a consumer law attorney who has expertise in student loan collection issues. The attorney may be able to help you:

  • Stop student loan wage garnishment;
  • Lower your monthly payments;
  • Rehabilitate your loan;
  • Get certain loans cancelled.

Interview With Student Loan Lawyer

Listen to this interview with attorney Joshua Cohen, a.k.a. The Student Loan Lawyer, where he explains your options if you are behind on student debt. Just click on the play button to listen online or use the download link to download to your smartphone or computer. You'll also find this podcast on iTunes.

DIY Student Loan Debt Resources

If you decide to try to handle your loans yourself, we recommend the following websites, which are good resources: (Department of Education)

Also, be sure to get a free copy of our ebook Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights.

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