Failing to pay student loans can have long lasting and severe consequences.  Although these debts may diminish into the background of everyday life once you are out of school and employed, they can no more be ignored than your mortgage or car payment, even though the the easy thing to do is to push them to the bottom of the “necessary to pay” list.  Student loans received from the US Department of Education can be pursued for payment by the Department using some powerful tools at their command.  As student loans are becoming more and more a part of bankruptcies, consult with Everett bankruptcy lawyers if you find yourself in arrears.

Additional Collection Fees
The loan guaranty agencies that guaranteed your loan can charge you collection fees if you fall into amounts overdue.  If the Department of Education hires collection agencies to go after you for payment, then they charge the Department Education a commission for their collection agents, which is passed along to you also.  So, you could end up owing, not only the amount for your loan, but collection fees and commissions – far more than you bargained for.

Snatching Your Tax Refund
Every year at tax time, the loan guaranty agency that guaranteed your student loan looks through your records to see if you are in arrears for 90 days.  If so, they notify the IRS who then holds back your tax refund.  The loan guaranty agency will then notify you that the IRS will be keeping your refund.  This process will continue each year until your balance is paid in full.  This is the easies way for the Department to recoup late payments and it collects millions of dollars every year in this manner.
If you find that this action is inappropriate, you do have recourse:

Notify the guaranty agency on paper and with evidence within 65 days of the date of the notice that you have:
•    Paid the arrears in full
•    You are making payments under an arrangement or you have been granted a forbearance, a delay or a cancellation.
•    You have become lastingly disabled since taking out the loan.
•    The loan is fraudulent and not your loan.
•    You dropped out of school or never attended and the school has not refunded your money.
•    You have filed for bankruptcy and completion of the action is still imminent or else your loan debt was discharged.
•    You received the loan to attend a “trade school” that closed prior to your completion of the course or else you were mistakenly certified to receive the loan.

Wage Garnishment
The loan guaranty agencies can garnish your wages for payment of monies in arrears.  This means that the agency can order your employer to turn over to them a percentage of your paycheck up to a maximum of 15%.  There are limitations on the amount that can be stripped, however.  The fill 15% cannot be taken as it would mean that your weekly income would be less than 30 times the federal minimum wage.  You can file an object to the garnishment for the same claims listed above for taking tax refunds or if you have returned to work within the last 12 months or if the garnishment would present extreme hardship.  Lawyers of bankruptcy in Everett can provide additional resources on garnishments for this purpose.

Garnishment of Federal Benefits
Social Security retirement and Social Security disability benefits may also be garnished for loan arrearages repayment.  Supplemental Security Income is not affected.  The first $9000 or $750 per month may be taken but the total amount may not be over 15% of your income.   If your Federal benefits do not exceed $750, then no money may be garnished.

Lawsuits
The Department of Education can file suit against you for defaulting on your student loans.  Unlike some other debts, there is no time limit on this and they can sue you indefinitely.   However, the Department is unlikely to sue if they determine you have no assets that total the value of the loan or if suing you would cost them more than they would gather.
For further information or to ask for help, contact the Department of Education’s Ombudsman.  Note that there are some steps that are required before actually speaking with an ombudsman, such as their “self resolution checklist” and “FAQ on resolving loan problems”. Everett bankruptcy lawyers can also offer other options for avoiding default on student loans.