Defaulting On Student Loans

Student loans are a reality of life for those seeking higher education as the cost of college and technical degrees have soared. Your Minnesota bankruptcy service sees that the average college graduate leaves college with more than $23,000 in student loan debt. But, once out of school and in the workplace, debt can quickly become overwhelming, especially for those working their way up a career "ladder". But defaulting on those student loans can lead to deeper problems and more heartache. Student loans obtained from the US Department of Education can be pursued for payment by the Department using some powerful tools at their disposal such as:

• Additional collection fees


• Attaching your tax refund


• Wage garnishment


• Garnishment of federal benefits


• Lawsuits

Additional Collection Fees

The loan guaranty agencies that guaranteed your loan can charge you collection fees if you fall into arrears. If the Department of Education hires collection agencies to pursue you for payment, then they charge the Department Education a commission for their collection agents, which is passed along to you.

Attaching your tax refund

This is the easiest way for the Department of Education to recoup any monies in arrears. Each year at tax time, the loan guaranty agency that guaranteed your student loan reviews your records to see if you are in arrears for 90 days. If so, they notify the IRS who then intercepts your tax refund. The loan guaranty agency will then notify you that the IRS will be keeping your refund. This process will go on each year until your debt is paid in full.

Wage Garnishment

The load guaranty agencies can garnish your wages for payment of monies in arrears. This means that the agency can order your employer to turn over to them a portion of your paycheck up to a maximum of 15%. There are limitations on the amount that can be garnished, however. The full 15% cannot be taken if it would mean that your weekly income would be less than 30 times the federal minimum wage.

Garnishment of Federal Benefits

Social Security retirement and Social Security disability benefits may also be garnished for loan arrearages repayment. Supplemental Security Income is not affected. The first $9000 or $750 per month may be taken but the total amount may not be over 15% of your income. If your Federal benefits are not over $750, then no money may be garnished. Contact a Minnesota bankruptcy service for further information.

Lawsuits

The Department of Education can file suit against you for defaulting on your student loans. Unlike some other debts, there is no time limit on this and they can sue you indefinitely. However, the Department is unlikely to sue if they deem you have no assets that total the value of the loan or if suing you would cost them more than they would collect. Contact a Minnesota bankruptcy service if you are named in a lawsuit.

If any of the above actions have been taken against you and you feel this is in error, you do have recourse. Notify the guaranty agency in writing and with evidence within 65 days of the date of the notice that you have:

• Paid the arrears in full


• You are making payments under an arrangement or you have been granted a forbearance, a delay or a cancellation.


• You have become permanently disabled since taking out the loan.


• The loan is fraudulent and not your loan.


• You dropped out of school or never attended and the school has not refunded your money.


• You have filed for bankruptcy and completion of the action is still pending or else your loan debt was discharged.


• You obtained the loan to attend a "trade school" that closed prior to your completion of the course or else you were incorrectly certified to receive the loan.

For further information or to ask for help, contact the Department of Education's Ombudsman and ask for their help or contact a Minnesota bankruptcy service if you feel bankruptcy is inevitable.





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