Federal Student Loan Collectors: What Can They Do?

Federal student loan collectors have different guidelines and abilities when it comes to collecting student debt.  Find out what they can do and what you can do to protect yourself against these measures.

two graduatesIf you have federal student loans that are past due or in default, your economic stability could be in danger.  Unlike private student loans and other unsecured debt, the federal government can take unexpected actions to recoup your past due payments on your student loans.

 Government or federal student loans include loan names such as PLUS, Perkins, FFEL, and the William D. Ford Direct Loan Program.  When these types of loans go into default, the government can take the following actions to collect on this unpaid debt:

  1. They can keep your tax refund.  That’s right!  You may not receive a tax refund until your student loan is paid in full. 
  2. They can stop the flow of student loans.  If you decide to go back to school, and you are in default on a previous student loan, you could be denied future student loan funding. 
  3. Unlike typical creditors, the government can garnish your wages without taking you to court.  This means they call your employer, and have the money automatically taken out of your paycheck before you even get it.
  4. They can take some of your social security benefits.  If you are disabled or retired, the government can take a portion of your check each month until the debt is paid.

 On top of these actions, the government can also add hefty collection fees on top of the debt you already owe.  When it comes to federal student loans, the best way to handle payment hardship is to call your lender and set up a more affordable payment plan.  There are many different types of repayment options available now.  A new legislation was recently passed to allow federal student loan borrowers to repay their loans based on an income sensitive plan.  If you have student loan payment issues, call your lender today.  If you are not sure of what type of student loan you have, you can call the Federal Student Aid Information Center at 1-800-4-FED-AID to get help in determining what type of loan you have. 




Comments

On 03/15  at  10:42 AM,

Jens said:

Hi, I think it’s strange that payday loans and cash advance loans is allowed in the US. In Germany you need to go to the bank to get a loan. Thats alot safer for everyone grin

Jens

On 06/10  at  04:50 AM,

accommodation melbourne said:

The legal definition and the economic definition of taxes differ in that economists do not consider many transfers to governments to be taxes. For example, some transfers to the public sector are comparable to prices.accommodation melbourne

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About the Author

Selena's photo Selena
Selena Ray has more than 2 years experience in the debt management industry and more than 10 years of personal experience with credit and debt. She has tested her financial advice and educational tips in her own personal experiences of managing a budget and tackling debt. She provides insights and education in the fields of debt, money management, and credit reports. Selena holds a bachelors degree from the University of North Carolina at Chapel Hill and counselor certification from the Center for Financial Certifications.

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