Student Loans & Debt Collection
Student loans are a type of debt that has been growing and growing in volume such that the amount of total student loan defaults in the United States has surpassed the total amount of credit card defaults. A student loan can be a private loan given by a private lender. In those instances, the loan is nothing more than a contract between lender and borrower and state contract laws will govern. However, most student loans are federally subsidized – meaning the ultimate guarantor of the loan was the federal government. These loans carry a completely different burden.
These debts cannot be expunged, erased or eliminated: Absent a showing of extreme hardship, which can be in very rare circumstances, federally funded student loans cannot be discharged in a bankruptcy. Moreover, there is no statute of limitations on them – which means the time with which the government has to collect never runs out. The federal government does not have to file a lawsuit to secure payments involuntarily. The government can garnish wages without a judgment. It is a process referred to as an “administrative wage garnishment” and requires only that they give you written warning before the garnishment takes place. These garnishments can go on until the entirety of the loan is paid.
Interest is always accruing on these debts: Unpaid student loans also continue to collect interest long after the loan goes into default. Any unpaid balance continues to collect penalties and interest. Therefore, an unpaid student loan can be very troublesome because they just cannot be extinguished.
No lawsuit or judgment needed: Just about all unpaid student loans go through a collection process with the use of third party collection agencies. The federal government contracts out to several different collection agencies who compete to see who collects the most money for the government. Considering that the continued ability to collect on these valuable debts is on the line, the stakes are high to these collectors to be effective and get the most money they can. As such, there have been many reports of abuse by collectors of student loans. If your rights were violated by a student loan collector – click for free case review.