Leaving them with worthless degrees. It is not a question of bankruptcy but of sheer greed and power perpetuated by a never ending drive of bureaucracy out of control.
Consequences[ edit ] Defaulting on a loan can adversely affect credit for many years. Default typically occurs when a loan receives no payment for days. The loan leaves repayment status and is due in full when the lender requests.
New collection costs are added to the loan's balance and the loan becomes drastically more expensive or eliminated through negotiation or legal action. There are other negative consequences resulting from a defaulted loan.
A student who wishes to return to school cannot qualify for federal aid in the United States until satisfactory payment arrangements are made on the defaulted loan or the loan is rehabilitated, a process that can take as long as a full year of on-time payments.
There are few options available for American students other than payment in full. The Bankruptcy Abuse Prevention and Consumer Protection Act makes discharging student loans through bankruptcy virtually impossible.
Critics have noted that this lack of bankruptcy protection for consumers results in a "risk-free" loan for creditors, removing pressure on creditors to negotiate lower payments. Garnishment of wages and tax refund[ edit ] In addition, the IRS can take the borrower's income tax refund until the defaulted loan is paid in full.
To object, a written statement must be presented within 65 days of the IRS' notice, and must give evidence of any of the following: The loan has been repaid. Payments have been made under a negotiated repayment agreement, or a cancellation, deferment or forbearance has been granted.
The borrower has filed for bankruptcy. The borrower is totally and permanently disabled. The loan in question is not the borrower's loan. The borrower dropped out of school and the school owes a refund. The borrower attended a trade school and the school closed.
The school falsely certified the borrower as being eligible for a loan. The government can also garnish wages as a way to recover money owed on a defaulted student loan.
The loan holder does not have to sue the borrower first. The government and private lenders can sue in order to collect on loans.
There is no time limit on suing to collect on federal student loans, and the borrower can be sued indefinitely. Private student loans, in most cases, are subject to statute of limitations laws depending on the state.
Getting out of default[ edit ] There are rehabilitation programs designed to help borrowers get out of debt. Rehabilitation is a federally mandated program that gives federal student loan borrowers a way to bring their loans out of default. Rehabilitation can reverse the many negative consequences of defaulting on a student loan, and participation is one of the few rights granted to federal education loan borrowers.
He or she must make at least 9 qualifying, on-time student loan payments. If any payments are missed, the borrower must begin the repayment schedule from the beginning. After borrowers complete the agreement, the guarantor transfers the loan to a lender and servicer.
The default status will be removed from your loan. You will regain eligibility for benefits that were available on the loan before you defaulted, such as deferment, forbearance, a choice of repayment plans, and loan forgiveness, and you will be eligible to receive additional federal student aid.Default: the Student Loan Documentary chronicles the stories of borrowers from different backgrounds affected by the student lending industry and their struggles to change the system.
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