If you have any similar experiences, let us know as we are curious to see how widespread the problem is with Allied Interstate — we know Allied Interstate has been fined in the past for student loan abuses and we doubt this is an isolated event.
It is no secret that there is an explosion of debt collection related to student loans and it is fairly common knowledge that student loan collectors have some greater powers than a typical collector has on a credit card debt or medical debt. We want to look at the additional powers these collectors have and the difference it makes whether the student loan is a private or federal student loan.
I have seen attorneys flatly say to people that there is no statute of limitation for private loans.
That you cannot discharge any student loan in bankruptcy.
Our friend Denise Richardson of givemebackmycredit.com has posted an article that discusses the huge percentage of student loans that defaulted last year. The national default rate on student loans was about 7% last year, credit cards defaulted at 8.8% and mortgages were defaulting at 9%. That 7% of defaulted student loans equals to roughly $876 billion, which is actually more than what national consumers owe on their credit cards.
The financial experts in the US are least worried about the rise in the student loan default rate. They are of the opinion that the student borrowers just can’t ignore the huge amount of student loan debt level with such a huge amount of educational loans.
Student debt reached $880 billion by the end of the summer in 2010, and that number is estimated to raise $2800 every second. The lack of gainful employment opportunties is also causing recent graduates to default on their student loans. The government is trying to help the situation by trying to increase job opportunities for students.
Here is some advice from financial experts for students who have taken out loans to finance their college education.
InsideArm.com has posted an article that discusses how private student loan companies have been very inefficiently collecting debt payments. Just a few years ago, debt losses in the form of student loans were extremely low because of benign credit conditions, strict underwriting, and the existence of guarantees for the loans.
Back then, traditional student loan collection practices — copied and pasted from check-the-box federal standards for collections practices — were a ticking time bomb, albeit with a very slow fuse. Deferments and forbearances could delay a loan from requiring a first payment for five years, and even longer in some cases. This meant the collection manager did not see the impending explosion of losses for some time.
Because of this, many companies weren’t in a rush to collect and some adopted a very laid back approach. But it caught up to them beginning in early 2007 and continuing into the middle of 2009 when the normal rate of delay of 120 days went up 7 times. This prompted some companies to step up their debt collecting by more frequent calling and other methods to more readily pursue payment.
The Florida Bankruptcy Attorney Blog has posted an article that discusses the effect bankruptcy has on student loans. Previously it was possible to discharge student loan debts after seven years if someone couldn’t make their monthly payment. However, amendments passed by the BAPCA (Bankruptcy Abuse Prevention and Consumer Protection Act) recently have made that more difficult.
These amendments require the person to prove to the court that you are undergoing “inordinate hardship” for bankruptcy to include student loans. The requirements for “inordinate hardship” are very strict and most people simply cannot fulfill the conditions.
The BKBlog has posted an article that discusses the effects bakruptcy has on student loans. Student loan creditors have become more active in collecting their money in light of the current economic decline. Different “collection resources” are available for student loan companies looking to collect their money, however
There is one statute that permits student loan creditors to garnish wages without the need to first go to court.Student loan claims can also offset tax refunds.
The blog cites an email that was sent to them.
I am unemployed and have defaulted student loans. I was married last April and my husband’s tax return was offset as a lovely wedding gift. I am researching how to file for bankruptcy for my other debts and also looking into how to prove “undue hardship” regarding the student loans. In the meantime, we were curious about whether or not my husband’s wages could be garnished? Since I am unemployed, this would devastate us. Also, once I get a job, if they are garnishing my husband’s wages, would they be able to garnish mine as well – at the same time?
The Michigan Collection Law Blog reminds us, however, that there is one time in which a collector can make this statement without violating the FDCPA – when certain types of student loans are being collected. As Gary Nitzkin puts it:
I learned about the Administrative Wage Garnishment for the first time today. I understand that since this law was passed in 2003, it has been a huge success in recouping defaulted student loans. Well why shouldn’t it? After all, a collector simply has to locate a debtor’s place of employment and whammo…..he can garnish the debtor’s wages without a judgment.
But just because the debt collector may be able to legitimately threaten garnishment without a judgment, other violations of the FDCPA can still form the basis of a legitimate lawsuit to stop abusive collectors.