Minnesota Student Loans Attorney

Collection of Federal Loans

The government however has other methods and will likely prevail in obtaining the money it is owed by a student debtor. The Department of Education does not need a lawsuit or judgment to begin actual collection of money owed. It also imposes collection fees of at least 16 percent of the balance owed in addition to the loan amount. Even with loan rehabilitation, the penalty fees typically remain in force.

If a student has a federally-backed loan the process involves the following:

  • After Loan 270 consecutive days of non-payment, the loan defaults
  • Notification by the Department of Education that the loan is in default
  • Department of Education (DOE) refers the account to a private collection company
  • The DOE debt collector contacts notifies borrower of loan’s default status
  • The borrower may have a chance to cure the default and avoid collection fees

When the debtor is unable to rehabilitate the loan, the collection process could involve these steps:

  • 16 percent collection fees are added to the loan

DOE initiates wage garnishment (borrower receives advance notice)

  • DOE initiates a process to capture the money through tax refunds (borrower receives advance notice)
  • DOE may initiate a process to capture the money through social security  borrower receives advance notice)
  • DOE may sue the debtor, although this is usually unnecessary

Contact the Tarshish Cody PLC law firm to protect your rights if you are notified of wage or other garnishment of funds. Fill out the Free Case Evaluation Form below or call our attorneys at 952-361-5556.

Wage garnishment is limited to 15 percent of the debtor’s disposable income. The tax refund capture has no set limits, and the social security capture has a maximum of $9,000 annually with monthly benefits maintained at a minimum of $750/month.

Student loan debtors may have options to stop or elude the collection process depending on whether the loan is private or federal. Also the different points in the process pre-judgment, default, etc. can affect the debtor’s options to stop the collection process. Generally, the earlier in the process, the easier it may be to stop the collections.

When in Doubt, Contact an Attorney

The regulations and laws that govern student loan collections and defaults are complex and can involve large sums of money. One of our attorneys at Tarshish Cody PLC will schedule a free initial consultation to discuss your rights, and options to help manage your student debt. We welcome your call today at 952-361-5556 (or fill out the free case evaluation form below) to help you through the legal issues of your case.

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