The rights and remedies pertaining to a student loan debt are different than those for other loans, especially if your loan is federally subsidized.
What Is Student Debt?
Student debt is the money owed on a student loan taken out to pay for educational expenses. Student loans are typically taken to pay for college and related costs, such as tuition, books, and other expenses.
Individuals can choose between federal and private loans. While federal student loans are provided by the federal government, private student loans are provided by private entities such as banks.
Loans are typically paid back according to a repayment plan, and monthly payments will be consistent across several years.
Many individuals struggle with high student loan payments. They typically assume that bankruptcy won’t affect student debt. But, the truth is bankruptcy can be used to discharge student loan debt. In order to achieve that, the borrower must be able to show that the debt is causing undue hardship.
However, if you stop making payments, your debt can default or be sold to a debt collector. A private student loan debt can go into default much quicker than a federal student loan. That can result in several dire consequences.
What If Your Student Loan Debt Has Moved Into Default and Collection
You can face collection action for the rest of your life if you default on the loan, as the debt has no statute of limitations, unlike other types of debt. You may have to come up with an alternate plan to deal with your student debt if you have been simply ignoring your student loan debt in the hope that it will eventually go away.
Whereas other types of debt require a lawsuit to be filed against you by your creditor, a student loan debt has no such requirement, meaning that your wages can be garnished or your tax refund taken to pay back the loan.
However, a collection agency trying to collect payment on a federal student loan debt is first required to send you a letter notifying you of their intent, and it’s important to take action if you get one. You only have a short length of time to take action if you receive such a letter, and the worst thing you can do is simply ignore the communication.
If you receive a letter, you are entitled to ask for an administration, as well as documentation regarding your loan. You should consider talking to a bankruptcy attorney if you have received a letter, or the collection agency is already garnishing your wages.
Another of the long-lasting consequences of defaulting on your student loans or having them sold to collection agencies is that it can impact the debtors’ credit scores for up to seven years.
Dealing With Your Student Loan Debt
There are solutions if you are struggling with too much student loan debt, which may not be available for other types of loans. For example, you may be able to receive student loan forgiveness under the Public Service Loan Forgiveness (PSLF) Program.
You also may have the right to participate in a rehabilitation program, or in a debt consolidation program. Federal student loan borrowers may be able to enroll in income-driven repayment plans. Their monthly payments can be arranged considering their income and family size. That way, you can put an end to those awkward collection calls by paying back the loan in payments that are affordable and realistic and avoid bankruptcy. Your credit score will also improve if you pay back the loan in a timely manner, making affordable payments.
There are also some scenarios in which your loan may be permanently discharged. These include your school or college closing, or your attending a school or college for which you were not qualified, and were inaccurately certified. The loan can also be discharged in the case of you being certified as disabled.
Discharging student loan debt through bankruptcy can also be an option. But, student loan attorneys have to prove undue hardship to achieve the discharge. For instance, it can be necessary that the debtor proves they cannot keep a minimal standard of living if forced to repay the loan. Discharging federal loans in bankruptcy can be harder than private student loans.
How Can We Help?
If you are dealing with a collection agency and have found yourself with your student loans in default, don’t lose hope. As you can see, there are ways to achieve student loan debt relief or debt forgiveness.
A bankruptcy attorney Marietta, GA, at Cherney Law Firm, can let you know your options. An attorney can help prove undue hardship if you have decided to file for bankruptcy. They may also be able to help achieve loan forgiveness.
If you are overwhelmed with student debt or have received one of the letters mentioned above, please contact one of our experienced attorneys. We can discuss your case with you during a free initial consultation.