How An Attorney Can Help You In A Student Loan Default

If you are a student and you took out a student loan to finance your higher education, there are a number of legal consequences when you fail to keep up with the payments of your loan. You will be considered as delinquent from the very first payment of your loan that you miss.

If you continue to become delinquent for a period of not less than nine months, then your loan will move into default. As a result of this, you will be also subjected to collection fees and other charges that are determined by the collection agencies and lenders.

What can happen when you become delinquent

  • If you have missed just one of your payments, you become delinquent.
  • Your delinquency starts on the very first day on which the payment is missed.
  • The lender can deliver you one collection letter or notification within the first fifteen days of your delinquency. They will inform you that the Federal Student Aid Ombudsman Group can assist you with regards to settling a federal student aid matter.
  • The more you continue as delinquent, the more notices and collection letters will be sent to you.
  • If your delinquency goes on for 9 months, your lender states that you are a defaulter

If your payment frequency is less than that, then the delinquency term might be stretched to 330 days.

What can happen when you default on your student loan

Given below are the most probable consequences of a student loan payment default:

  • You may be reported to a credit bureau and credit collection agency
  • The collection costs might be summed up with the overdue amount
  • Your paychecks may be garnished (withdrawn) – up to 15% of your post tax income can be garnished
  • You will not be able to qualify for any additional federal student aid
  • You might face a lawsuit (there is no time limit as to when lenders can sue you to recover their dues) where a lien can be put on your property or your bank account can be garnished
  • You will not obtain any income tax refund
  • You will not be able to qualify for any form of loan forbearance or deferment

As soon as you become a defaulter, the whole amount that you borrowed will become overdue.

How An Attorney Can Help You In This Situation

A student loan attorney can help you deal with delinquencies and defaults. There are state and federal regulations that can save you from harassment posed by collection agencies and lenders. A student loan attorney is very much aware about this and can help you find an effective solution. Some of these solutions that these lawyers may recommend are as follows:

  • Forbearance and deferment
  • Cancellation and elimination of all payments
  • Income-based repayment options/affordable payment rights
  • Rehabilitation of defaulted student loans (it features a possibility of a significant betterment of your credit score)
  • Student debt consolidation (federal loans are not allowed to be consolidated with private ones)
  • Federal discharge
  • Filing bankruptcy
  • Student loan forgiveness

Always remember that majority of student loans cannot be offset or discharged under bankruptcy. However, you can have them discharged under specific circumstances. If you feel that you don’t have any other option but to file bankruptcy, then always feel free to talk to a bankruptcy lawyer because he will give you the right advice in line with your financial situation.

You cannot normally eliminate student loans when you are filing for bankruptcy, but you can get them discharged if you can substantiate that paying the money back is a serious difficulty for you through furnishing the relevant papers and forms to the court like the following:

  • How long you expect your financial difficulties to go on
  • Records supporting your income and expenditures
  • How sincerely you attempted to clear the amount you owe

Author bio: Kevin is a vigorous blogger who has been covering topics related to nonpayment of personal loans online, filing bankruptcy, and loan forbearance.