Defaulted student loans are becoming increasingly common around the country. Here we offer a brief guide as to what you should expect to happen if you default on your student loans, and what you can do to get back in control of the situation.
For the majority of student loans, a default will occur if the loan has not been repaid for 270 days in the case of a loan repaid in monthly installments, and 330 days for those repaid in other types of installments. There are several steps that the government can take against you if you fail to make your student loan payments and the loan becomes defaulted:
A Tax Refund Offset is a common step. Here the IRS intercepts any income tax rebates that you are due, and withholds the funds until your student loans are repaid in full. If this happens to you, it is possible to challenge the offset.
It is also possible that the government will garnish your paycheck. Garnishing means taking a limited percentage of your wages, usually up to a maximum of 15% of your income or 30 times the current minimum wage. Again, if this happens to you, it is possible to challenge the garnishing.
Another step that the government can take if you have defaulted student loans is to take some of your federal benefit payments from you, such as social security income. There are, however, limits to the amount that can be taken.
A final, less common step that may be taken against you is suing. Both the government and private lenders are able to sue you to collect the money, and there is no time limit on this happening, so it could be several years down the line when you have all but forgotten about the loans.
If you find yourself in trouble with defaulted student loans, there are several steps that you can take to get help. You can call the Department of Education's Ombudsman on 877-557-2575 or you can visit the department's website fafsa, but they will only be able to help you if you have first made an effort to sort out the problems for yourself.
A good place to start sorting things out for yourself is to visit the website of Student Loan Borrower Assistance they provide answers to a large range of questions regarding defaulted student loans, and can help you find a solution to a number of student loan related problems.
Missing payments and ending up with defaulted student loans is not advised in any way. As well as the above repercussions, credit bureaus can be notified meaning your credit rating will plummet, and your loan may also be passed onto a collections agency and you will be required to pay additional collection costs as well as the full amount of the loan.
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Article Added on Wednesday, July 18, 2012
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