What You Need to Know about Student Loans

The consequences of defaulting on a student loan are a bit different than other loans. Thanks to aggressive collection tactics and no statute of limitations, chances are you will have to pay your loan at some point.

Consequences

If you have ever fallen behind on a student loan, you probably know that your phone will ring off the hook. When you default, the collection calls get even more intense. The government hires some of the most aggressive collection agencies out there. They are paid on commission and so the only time they get paid is if they collect from you. They will call you repeatedly and often people feel harassed. Some will even break the law and talk to friends and family. (Getting your contact information is the only thing they can legally talk to your family or friends about.)

If you have a good job, chances are that a lawsuit will be filed against you. You will lose in court. Once that happens, the collection company will petition the court for a wage garnishment. They will give the garnishment award to your employer. The law requires that your employer send a percentage of your income to the collecting agency before you get paid. The amount that they take is usually more than what you were paying.

You can also forget about getting a tax return! Until your loan is paid in full, the government will take any refund that you have coming to you.

People with student loans that are old often make the mistake of believing that it will soon just fall of their credit report?t have to worry about it anymore. Unfortunately, like tax debts, student loans have no statute of limitations. This means that until you you pay your loan, it will follow you!

Luckily, the Federal Government has a program in place that allows you rehabilitate your loan. This is a program that allows you to make nine payments on time within a ten month period. On time payments are considered to be anything that you make voluntarily within 20 days of it?s due date. (If you make a payment as a result of a wage garnishment this does no?t count.)

Once you have done this, your loan will be considered rehabilitated and taken out of default status. This means that garnishment and seizure of tax refunds will end. You will also be eligible for many of the benefits, like deferment, that were available to you before your loan defaulted.


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Vincent Polisi is the founder of Credit Repair College. To learn more about credit repair and student loan default, please visit him on the web.