Stats show around 45 million Americans have student loan debt and 11.1% are in default by 90 days or more. If you have outstanding student loan debt in East Orange, New Jersey, you may get calls from collectors. However, you have rights under the law and options for handling the debt.
What happens to loans in default?
There are two types of loans, federal and private, and what happens when you default differs between them. A private student loan lender commonly considers the debt delinquent at 120 days past due, but some lenders may not wait that long.
Federal student loan debt commonly is at risk for collections at 270 days past due, but they are considered delinquent at 30 days past due. The interest and balance on a federal student loan accelerate, which means the balance is due immediately. Federal lenders can garnish wages, social security, or tax refunds without a court order, but a private lender needs a court order.
How do you handle collectors?
Ensure they follow the Fair Debt Collection Practices Act, which controls how collectors can collect payments. The law prohibits them from repeated calling, empty threats of legal action, and calling between 9 pm and 8 am without permission.
If your private student loan isn’t in default, some lenders offer short-term forbearance for three years, but interest still accrues. Forbearance without accrued interest is available for federal student loans if your payment is 20% of the loan.
If a private loan is in default, you will have to attempt a settlement or offer a payment. You can rehabilitate federal loans after you make several timely payments, work out a repayment plan, or consolidate.
A defaulted student loan can prevent you from getting credit, future student loans, and home loans. Sometimes, lenders turn over debt already paid or an ID gets stolen, so open a dispute, if you believe it is an error.