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Most of the guaranty agencies’ stringent collection
procedures have successfully deterred student loan neglect. One of the
supports for this claim is the steady decrease and current all-time low of
student loan default rates. However, although the collections department
is highly committed to assisting those who are in default and making repayment
as simple as possible, the non-response in the borrowers’ side still opens up
to one or more of the following collection approaches: - Garnishment of Administrative Wage: Under the
Higher Education Act of 1965, the Department of Education as well as the state
guaranty agencies may require employers who employ individuals with defaulted
student loans to take away 10 to 15 percent of the debtor’s disposable income
per pay period. The garnishment of the administrative wage is
actually a resort taken only when the debtor refuses to voluntarily repay his or
her defaulted debts and may persist until the total balance of the outstanding
debt is paid back. - Treasury Offset Payments: Aside from administrative
wage garnishment, the Department of Education has the right to request the
Treasury Department to perform a federal offset against the federal income tax
refunds as a way of collecting defaulted student loan debt. To
simply put, the borrowers with loans in default status may forgo any federal tax
refunds until he or she has repaid the defaulted loan.
Legal Action Litigation can be pursued by the Department of Education as
well as state guaranty agencies as a means for collecting the defaulted loans.
It means that if the debtor refuses to repay the debt voluntarily, he or she is
subject to prosecution in a state or federal district court. The
borrower is therefore sued for the outstanding debt as well as for the attorney
and court fees. But, these methods are usually considered as last
resorts, thus need prior notice of the proposed offset.
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Student Loan Default The Consequences Of Defaulting |
