Student Loan Collections: The Breaking Bad Of Loan Servicers and The Perfect Escape Plan

Student Loan Collections

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The very fact that you came to this blog suggests that you don’t know how to tackle Student Loan Collections and that you are covered in Student Loan Debt from head to toe.

All Hell Breaks Lose

As if the trials of this life weren’t enough, Loan servicers have maneuvered the U.S into $ 1.5 Trillion debt. We aren’t romancing, the Navient Case and the CFBP intervening on behalf of the people at taking the matter to court has affirmed that there has been a deliberate foul play on the part of loan servicers.

$ 1.5 Trillion debt, COLOSSAL, isn’t it. 44 million Americans have an average of $30,000 debt and that is enough to haunt someone for life.

Read more: Is Student Loan Refinancing Risky? Here is What You Should Know

Authorities are Getting Under the Skin

You too are afflicted with student loan collection, and you know how it feels to get calls from your loan servicers right? The reminder calls which turn out to be intimidating more often than not, the emails which get under your skin and even the representatives of your loan servicers who drop by every now and then, have ruined the quality of your life. There’s no denying that.

Actually, you ought to be thanking your heavens because it gets much worse than this. Healthcare workers have got their license canceled because they were running behind on paying their student loan debt. What’s even worse? A man was arrested by US Marshal’s office for owing a student loan debt of $1500.

The Past is Forlorn

Do you ever wonder how did the situation turn this grave even if you never intended to default on your loan? You have to be very critical of the situation than just surrender and leave the matters into the hands of fate. You have to put up a fight and for that, you will have to delve into the history a bit.

Student debt collection has become a multi-billion dollar predatory industry and hence, you need to have two Master Plans handy; one for paying off the debt and the second for dodging off the predators.

Connecting the Dots

You have to go back to where it all started, 2010. The then President Mr. Obama brought a kind of renaissance to many things, however, things didn’t end up as intended.

One such Big Change was that Mr. Obama wanted to make the student loan more easily available to the public under his period in office, the Department of Education started giving loans directly to the student. But, the DOE was not designed to be a massive bank and hence it hired private players for loan management, also known as loan servicers.

Tyrants got a Free Hand

This is where the abuse began and loan servicers (at least a majority of them) took to unethical practices such as misleading customers and shoving forbearance program down their throat so as to add up more interest to their debt tally.

This is how loan servicers have quadrupled their profit and maneuvered the nation into $1.5 Trillion student loan debt.

*Collections Lurking Over your Head*. Now What?

Now that your boat is sinking, you need an emergency plan as the long arms of the agency are hard to escape. Even though the loan servicers have bore malice against the nation, you still owe your student loan debt to Uncle Sam.

Your student loan debt ends up in collection because you defaulted on it. Your loan ending up in collections implies that you are screwed and that you have to own your mistake.

How your Debt can Escalate Quickly?

They say that whatever goes around, comes around. If you have defaulted student loan, then you will be penalized at some point in life. Collections are exactly the same accrued penalty that we are talking about.

If your account enters into collections, you will be charged a fault out 15 to 40% assessment fees o the student loan amount that you owe depending on who your loan servicer is. Just to get a taste of it, charge 40% assessment fees on a student loan debt of $30,000, that makes it $42,000.

As if this assessment fee was a little south of tyrannous, as long as you are in default you could be further afflicted with:-

  • Seizure of income tax refunds to repay tabs, wages can be garnished too
  • Your eligibility for federal financial aid can be strapped
  • Your subsidies can be evoked
  • Your credit score will bear defaulted loans, thus crippling your credit score for almost a decade

Student loan collection will endeavor to collect this debt from you. If you are being harassed and if the collector is intimidating you, make sure you understand your legal right under the Fair Debt Collection Practices Act.

Yeah, there exists a law statute to safeguard you from the harassment of the collectors, you should have known it.

Knowing these laws will not only save you from fraudulent activities but will also keep debt collectors from invading your privacy. There is a lengthy list of what student loan collection agencies cannot do in order to make you pay your debt. They can’t threaten to arrest you if you don’t pay.

You can find the full list of activities which are forbidden by the Fair Debt Collection Practices Act on the FTC website.

Well, these are the points which will motivate you to stay out of default, but if you are already dealing with collections, you would want to break out of it.

How to Get Out of Collections

If you’re in collections, burying the head in the sand won’t make it go away. You need to figure out your options.

The simplest way to get out of student loan collections is by making a qualifying payment which will result in yours being less than 270 days in default. However, all may not have that privilege, so they would have to contemplate other options.

  • Rehabilitation means counting on the Department of Education and agreeing with their payment plan. Once you have made a certain number of payments on time, you can remove the tag of collections.
  • Student Loan Consolidation is an option wherein the balances from a number of loans are clubbed as one and the debtor has just one monthly financial payment to live up to. However, you will have to make 3 consecutive, self-initiated on-time payments to qualify for debt consolidation offered by the Department of Education.
  • Bankruptcy though not the most popular amongst all is still an option to dodge off collections and get rid of the financial liability all once. Think of bankruptcy as pulling off a heist, it might seem to be mission impossible mission but with proper planning and risk mitigation, you can be through easily.

How Not to Fall into the Abyss of Collections Again

Once you are out of default, make sure that you don’t fall into the abyss again. You should be quick to adhere to a manageable repayment plan that would keep you from falling behind on payments. The key is to remain farsighted and seek help from professional to work our way through before getting caught off guard.

To start, make sure your payment plan is the right option for you. There are various student loan repayment plans that can bring the monthly payment amount down based on a variety of factors. Just keep in mind that many of these payment plans will increase the total amount you’ll have to repay.

Talk to your loan servicers about an income-based repayment plan. You can also go for Deferment which means that you can stop making payments and the interest won’t accrue for the time you aren’t making payments.

Forbearance is yet another option wherein you get a relaxation of 12 month due to illness or other valid reasons. However, interest is accrued (subjectively) on the loans that you owe.

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