Consequences of Defaulting on a Student Loan

Posted on Apr 25, 2014 By Joshua Lawhorn

Josh Lawhorn Bankruptcy AttorneyA major financial problem in the United States today is student loan debt. College tuition is sharply increasing while the average salary remains stagnant. Many college graduates have difficulty finding a job in their field of study or at all. During this difficult time, one thing remains: student loans. While deferment and forbearance programs are an option, those possibilities often fail and the interest on the loans continues to add more to what is owed. Once the few options available are exhausted, borrowers unable to pay can default on their student loans. After default, both government guaranteed and private student loan lenders have options available to collect on defaulted student loans.

One option available is wage garnishment. The government guaranteed student loans can garnish up to 15% of your disposable income per pay period and can continue the garnishment until the loan is paid in full.  Also, government guaranteed or a private student loan lender can choose to file a lawsuit against you. Once a judgment is entered, there are several options available to collect on the loan. The lender can also add court costs and attorney’s fees associated with the lawsuit.

Government guaranteed student loan lenders can also intercept your state or federal tax refund. Many people rely on their tax refunds each year only to have it offset due to a defaulted student loan. This is a fairly common method that government guaranteed lenders use to collect after default.

If you receive social security disability or retirement benefits, government guaranteed lenders can garnish 15% of your benefits. This is one of the few situations in which social security benefits can be garnished.

If you are currently in default or in danger of default on your student loans, you do have options but you need to act quickly. Our experienced attorneys at our many locations can help guide you through these options. If you need financial help, please contact our office nearest to you to set up a free consultation visit with one of our licensed attorneys.