Understand Student Loan Default

While there are some types of loans you have a good chance of walking away from, student loans are not that type of loan. Here is what you need to know about defaulted student loans.ConsequencesIf 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. Although it is against the law, some will even resort to talking to family and friends about your situation. (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 garni
shment. This will then be presented to your employer. The law requires that your employer send a percentage of your income to the collecting agency before you get paid. The payment ends up being much larger that what your regular payment was.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.If you have an older student loan, you may be thinking that it will just fall off your credit report after seven years and you won?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!The good news is that you can rehabilitate your student 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. (Payments received through litigation or garn
ishments don?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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