Gail DonaldsonAmericans are drowning in student loan debt.  More than 3,000 people default on their federal student loans every day.  It takes around 20 years for the average student loan borrower to pay off their loans.  Today, there are over 44 million Americans with a total student loan debt of $1.4 trillion.  But what happens if you can’t make the necessary payments?

Missing a student loan payment will hurt your credit score and make it harder to borrow money in the future.  What happens beyond your credit score depends on whether your student loan is held by the federal government or a private student loan company.

Federal Student Loans

Federal student loans are usually the best choice for obtaining a degree because they offer more flexible repayment plans.  If you miss a payment on your federal student loans, you have 270 days to make a payment before your debt goes into default.  If your student loan debt is default status, the government can garnish your wages, your Social Security check, your federal tax refund and even your disability benefits.

If the department of education works with third-party collection companies where additional charges and penalties for not making a payment which can be a percentage of the balance of your loans.  The government can also sue you.  If the government wins, they could place a lien on your home and even force a sale.

Private Student Loans

Private student loans do not offer the flexibility that a federal student loan has. If you miss a payment, the specific procedures vary depending on the contract, state law and company policy.  The remedy that private student loan companies have is to sue you based on the contract you signed.   Many borrowers have been successful in court clearing the student loan debt owed to private student loan companies for lack of the proper paperwork by the student loan company.  If you have borrowed money and are being sued by a private student loan debt company, be sure to confirm that they possess all the required paperwork.  Avoid predatory private loan companies and for-profit colleges and research what repayment plan works best for you.

Are you in over your head with your student loans?  If so, please contact one of our Bond & Botes offices and schedule a free consultation so an attorney can discuss your financial situation to see if we can help!

Gail Donaldson
Written by Gail Donaldson

Gail Hughes Donaldson is a Managing Partner of the Bond & Botes Law Offices in Montgomery and Opelika, Alabama. She holds a Bachelor of Science from Auburn University at Montgomery, and a Juris Doctorate from Thomas Goode Jones School of Law. She’s been helping families work through the bankruptcy process since she started with Bond & Botes back in 1993 as a paralegal. Read her full bio here.

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