Student Loan Default - My Insider Perspective

I hate to openly talk about things like this, but honestly, there are debts that people can turn their backs on. For instance, I have a XM radio subscription in collections which I never signed up for their services (I guess the dealer ship signed me up automatically or I didn't read the contract carefully). Student Loans on the other hand, would be considered something that we should not take lightly. This article is about defaulted student loans and what you should understand as a borrower.

What can happen if my loan is defaulted?

Have you fallen behind on your student loan? It's probable that your phone is blowing up like crazy. If your loans default, the government will launch a full-scale over-the-phone assault. Their guard dogs will hound you down, and these types of phone calls could get pretty intense. When I say guard dogs, I am referring to the collection agencies "servicing" your loans. The agencies do all the dirty work for the big-dog (Dept. of Ed). Since the government gives out student loans like free samples at COSTCO on Sundays, it would be unethical for them to directly collect on these student loans. This is exactly the reason why collection agencies get involved. The collectors will call, and call, and when you think it stopped, they will call again. They will even go as far as contacting your family remember or friends. Legally they are able to contact your "references" as long as they believe that it is a way to contact you.

If you're making pretty good money, it is possible that a lawsuit will be filed. Since you have a valid debt, and you owe the money, you'll be defense less.

If you let this linger long enough you'll be dealing with a bigger problem, wage garnishment. Your employer is legally obligated to take a chunk out of your paycheck, and send this amount as "involuntary" payment.

Remember "Involuntary" payments do not count towards any type of formal program. Of course, the money will be applied to your account, but not allocated in your favor. Keep in mind with a student loan garnishment 80% of your payment will go towards back-interest and 20% will go towards the collection cost (Collection cost could be waived if you play your cards right). The sad thing is, typically, the garnishment amount is much higher than "Voluntary" payment programs.

Freedom Blog:
Student Loan Collection and everything you need to know about your defaulted loan.
Free Report "Confessions of a Student Loan collector"
Student Loan Collections
Article Source: http://EzineArticles.com/?expert=Christopher_Kay