It's Time to Take Action!
Do you have defaulted student loans? How to fix your credit Jim Kemish talks about the many ways the government can collect, as well as your rights to start fixing the problem right away.
Still, there is hope!
There is no limit on how long you have to pay back a student loan. Don't try to hide until the collectors give up and go away on their own. They will always try to find you. Even worse, people who collect student loans have special powers that can make your life very hard. Federal law gives you a number of options that will help you fix your credit, stop debt collectors, and even come out ahead.
It depends on you
If you do something, you can stop debt collectors, lower your payments, and get the default mark off your credit report. But you have to make the first move. No one will help you if you don't do anything, and the situation will get worse. Are you taking part in a programme to fix your credit? You have nothing to lose by taking action right now. Let's take a look at what the government can do, and then we'll talk about what you can do to stop the problems for good.
Stop getting tax refunds.
If you are behind on your payments and are due a tax refund, you should expect the government to take it. This is almost a sure thing. If you want to avoid this while you figure out what to do, you should get rid of your next tax refund today so that there is nothing to seize. This is simple to do. Just tell your employer to take less money out of your pay or, if you're self-employed, pay less in estimated taxes.
The Surprise on the Check
Collectors of student loans can now take money from your paycheck without a court order. At the moment, they can take either 15% of your disposable income or the amount of your disposable income that is more than $154 per week, whichever is less.
Social Security can now be attacked.
In 1996, a law was passed that said people who didn't pay their student loans could have their Social Security money taken away. But the amount that can be taken is not unlimited. The first $9,000 a year, or $750 a month, is safe. And you can only take 15 percent of your total benefits at any time, no matter what.
Student loan debts will be forgiven
Theoretically, you could get rid of your student loan debt if your school had major problems (like closing down while you were there), if you became totally and permanently disabled after taking out the loan, or if you could persuade a judge to throw out the debt when you filed for bankruptcy. If you choose one of these options, you can expect to have to fill out a lot of paperwork and have few chances of succeeding. I'm sorry to say that in the nearly twenty years I've been helping people fix their credit, I've never seen anyone get their student loan debt cancelled. There are two easy ways to solve your student loan problems that will stop collection efforts and help you set up a reasonable payment plan that you can afford.
Consolidation of student loans
Depending on the type of student loan you have, you can choose between two different consolidation plans. Most student loans are either Direct Loans or FFEL loans, which stand for Federal Family Education Loans. FFEL loans are given by banks or other institutions, and the government backs them. Direct loans, on the other hand, are given directly by the government through your school. Stafford Loans, Guaranteed Student Loans, and Plus Loans can be either FFEL or Direct Loans. Under the FFEL plan, you have to pay at least the monthly interest each month. There is no set minimum for the Direct plan. If you have at least one Direct Loan, you can join the Direct plan, even if the rest of your loans are FFEL loans. Are you in a programme to fix your credit and thinking about your options, but you're worried about your money? Both plans allow you to stop making payments for up to three years after consolidation.
Rehabilitation
Rehabilitation, unlike consolidation, won't let you combine your existing loans into a single new loan. However, it will remove the default status from your credit report, which makes it appealing to people in credit repair programmes. You have the right, just like with consolidation, to ask for a payment plan that you can afford. In order to get your licence back, you have to go through a trial period where you have to make nine of your next ten payments on time. Once the trial period is over, your loan will be sold to a new lender, and the "in default" mark will be taken off your credit report.
Getting Started
Before talking to your lender or collector about your options, I strongly suggest that you contact one of the resources set up to help with these kinds of problems. For more information about your rights, please call the Student Loan Ombudsman Office at (877) 557-2575 or the Federal Student Aid Information Center at (800) 4FED-AID.
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