Most of the time, consolidation is a faster way for students to get out of debt than a reasonable payment plan. As soon as you fill out an application and get a direct consolidation loan, you will no longer be in default. As long as you keep making payments, you will stay this way.
Even though student loans are not secured debt and you won't lose your house or car if you don't pay them, they are also different from most other unsecured debts. If you don't pay back your student loans, you won't be able to get any more in the future. Also, the government will use a number of unique ways to collect on your debt that no one else can do.
These government tools for collecting information can lead to very bad things.
First, the government can charge you collection fees that are often much higher than the amount you borrowed in the first place. Second, unlike almost every other type of debt, there is no limit on how long you have to pay back a student loan. This means that the government can try to get you to pay back your loans every 20–30 years after you went to school.
If you don't pay back your student loans, the government can also:
- Take your tax money back
- take a certain amount of your cash-flowing income
- Attach some federal benefits, like Social Security income, that are usually exempt from collection.
If you get a notice about a wage garnishment or a tax intercept, you can ask for a hearing to fight it.
Just asking for a hearing can be enough to get the collector to agree to a payment plan. If you can pay a small amount, you should look into the different affordable payment plans that can get you out of default.
The department of Education's student loan programme helps people who are having trouble with their student loans.
If you can't make your student loan payments because you don't make much money, your local legal aid or legal services office may be able to help.
