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Delinquency and Default in Private and Federal Student Loans

  • Aug 31 2018

In the US today, cumulative student loan debt totals continue to ascend further and further, solidifying what is happening into a full-blown crisis. And on the individual level, individuals in the 20- to 30-something range struggle with average monthly payments of over $350 per month. It doesn’t take much to figure out how challenging such figures could be for borrowers (the younger ones especially) to pay back in a competitive job market where the cost of living keeps rising—along with housing costs, healthcare costs, and more.

Student Loans Are Difficult to Discharge in Bankruptcy

Other unsecured debt such as credit cards may fall into delinquency as well as default, but timelines and levels of consequence tend to be different. Credit card corporations will generally charge off accounts after 180 days and sell off accounts to debt collection agencies. Whether or not they will develop into collections lawsuits (or thereafter, dreaded default judgments) can be hard to say sometimes despite the threats issued during phone calls and letters. Unlike student loans, it is also easier to see unsecured debts such as credit cards discharged in bankruptcy.

Student loans are considered delinquent as soon as you are late on the bill, technically. And while servicers may begin to write and call and chase you for payments, the student loan debt is not considered in default until payments have been late for nine months. After that, your student loan servicer will begin much more aggressive activity to see the debt satisfied—and if they cannot, the repercussions will vary between private and federal loans.

Collection Activity Can Be Aggressive; Repercussions Challenging

Collection activity on a private student loan is like that of other debts, with the typical damage to the credit report, and the possibility of a collections lawsuit followed by the possibility of a default judgment. Federal student loans—while there is much more flexibility in terms of repayment for the debtor who is having trouble—come with a long list of consequences in default though. Negative credit reporting occurs, you may never be able to get another student loan, tax refunds may be intercepted, wages may be garnished, and more.

Contact Us for Help Now!

It is best to avoid defaulting on a student loan at all cost! If you worried, contact Fitzgerald & Campbell, APLC now. Our experienced student loan debt attorneys will be glad to review your case and discuss all the available options with you. Our attorneys have decades of experience in serving clients as they navigate through challenging financial situations, to include student loan issues, bankruptcy and other debt management processes. We are here to help! Call us today for a free consultation at (855) 709-5788 or email us at info@debtorprotectors.com.

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Posted in: Bankruptcy, Student Loan Debt