In these hard economic times, it has become increasingly difficult for many people to pay off their debts – including the money that they owe for student loans. Unlike other debts, such as credit cards, student loan debt cannot be discharged in bankruptcy, which puts people at risk for serious repercussions.
In recent years, it has become increasingly common for the U.S. Department of Education to aggressively pursue those who have defaulted on their student loans. In order to do this, the department gives the names of people who have defaulted on their loans to federal prosecutors, who then hire others to collect the debt.
The result has been almost 5,000 lawsuits filed against those who defaulted on student loans in the last year.
Consequences of Defaulting on Student Loans
A student loan is classified as being in default if a borrower does not make payments for nine months. The consequences of this can make a challenging financial situation even worse: Those who have defaulted on these loans may have their tax refunds withheld, lose their retirement benefits, have their wages and bank accounts garnished, or lose their professional licenses.
If You Have Defaulted on a Student Loan
If you have defaulted on your student loan, there are some options that may help you. For example, there are programs that may allow you to rehabilitate or consolidate your debts. Bankruptcy is also a good option for those people who have other debts in addition to their student loans.
Although you cannot discharge a student loan through bankruptcy, filing may help you to get relief from your other debts, making your total debt load much more manageable.
Source: AZCentral.com, “Student-loan defaulters have few options
Government uses aggressive tactics to get its money back,” John Hechinger, July 7, 2012