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Student Loan Debt Collection: Defaults, Disputes, and More

Most student loans are guaranteed by the government, meaning if you default on them, the government will reimburse the lender for the amount you were loaned. Because of this guarantee, education loans are different from most other types of consumer debt, and student loan debt collection needs to be dealt with in a slightly different way.

If you default on a loan or credit line of another type, a settlement can be negotiated or the loan can be discharged in bankruptcy. Default student loans are different; they are not covered by bankruptcy, and the government can offset other money you are owed to collect the amount due. Your income tax refund can be seized each year until the money is paid, so getting rid of the debt from a defaulted loan should be a priority.

If you are behind on student loan payments:

If you fall behind on a educational loan, but have not yet defaulted, you may be able to repair the situation before things go too far. First, contact the company that administers your student loan; this will not be the debt collector. Double check the amounts to be sure they are correct, and then apply immediately for forbearance or a deferment. Either of these options will allow you some time to get back on track financially without further consequences. Collection efforts will cease while you are in forbearance or deferment, and you will not be put into default.

If you have default educational loans:

If you already have default student loans, your account will be subject to collection. If you are contacted by a student loan debt collection agency, you can ask them to validate the debt, just like you would for any other debt. They are required by law to provide you with the name and address of the company that is administering your loan. If you already know this information, request validation anyway, because the amount the debt collector is charging may be different from the actual amount you owe. Getting the information from the original source is the best way to know exactly what you owe.

Student loan debt collection and debt collectors need to follow the same rules as regular debt collectors; they may not harass you, lie or attempt to intimidate you. They are required to work with you to cure the default through a default resolution or rehabilitation program. To rehabilitate the loan, you will need to make monthly payments in an amount that is both affordable to you and acceptable to the lender for a set amount of time. Once you complete rehabilitation, you can pay your student loan debt as usual.

If you dispute the loans:

Just because a loan is guaranteed by the government doesn’t mean that the information is necessarily correct. You can ask for validation or dispute the loan to see copies of the original information. If you still disagree with the loan amounts or information, you can contact an ombudsman or a fair collection attorney in order to dispute a student loan or loans and help you work through the process.