Student Loan Delinquency

(Is there any way to deal with these things?)

My firm has the only dedicated student loan law department in the country that I am aware of, and we follow the news about student loans.   There are many stories regarding student loans mainly focusing on two topics:  the growing student loan epidemic facing the country and student loan collection horror stories.  While I can spend countless hours reviewing the reasons why the student loan system is failing, I am going to focus on the growing number of student loan collection stories that are surfacing in the news.

More and more traditional collection agencies and law firms are entering student loan collections because they view it as the next great windfall in terms of collections.  In some respects, they are correct.  Based on the number of outstanding loans and the amount outstanding, the opportunity for collectors is unparalleled, however, student loan collection, at least government student loan collections, are not typical collections and leave plenty of opportunity for mistake.

Government student loans are issued directly by or guaranteed by the federal government.   Private loans are issued by private banks and not issued or guaranteed by the federal government.  Both private and federal student loans are non-dischargeable in bankruptcy.  Private student loans are bound by the appropriate statute of limitations, federal student loans are not and can be collected upon until paid, no matter how long that takes.  Private student loans, including the issuance of forbearances and deferments and alternative payment arrangements are in the sole discretion of the private lender.   Federal student loans have a variety of payment plans including a rehabilitation program when your loan is in default.   It is this key difference that causes problems for most student loan debt collectors.

Debt collectors work off one main principle – Collect as much money as you can as fast as you can.  The goal is determine how much you can collect and what threats or incentives from the collector to the debtor get the collector to their desired results.   There are usually not many formal rules as to how to collect a payment, meaning that if a collector got even a small payment from the debtor, they would take it.   Although the small payment would do nothing regarding the ultimate resolution of the debt, it gets the debt collector and the holder of the debt something even more important.  Even the smallest of payments restarts the statute of limitations on a debt and provides the debt collector a whole new window to collect on the debt.

Federal student loans work quite differently than private debt.   Federal student loan debt is not subject to any statute of limitations.  Additionally, there are governmental rules and regulations on how to collect federal student loan debt, including circumstances and situations where federal student loan debt can be discharged.    Federal student loan debt regulations are designed to help the borrower come current and make payments on the debt.This borrower –centric approach is foreign to debt collectors who are used to working and sadly, sometimes to debt collectors who focus on student loan collections.   All too often, federal student loan borrowers are not informed of these repayment options but the debt collectors and even when they offered them, there are times when they are mishandled by the debt collectors.

So what is a student loan borrower to do?  As with anything, it is always best to get assistance from trained professionals with knowledge in the area.   The trouble is that there are not many reliable sources of assistance in the student loan area.  That is why we started our student loan department. My firm is dedicated to assisting consumers experiencing financial difficulties and helping them understand their options.  We have Josh Cohen, also known as the “Student Loan Lawyer” who leads to the Student Loan department.  Between Josh, my staff, and me, we spend a large amount of time continually educating ourselves on the changes in the student loan arena.   We provide consultations that educate clients as to their options, on both private and federal loans, file litigation against debt collectors who violate collection laws, and assist borrowers get the desired payment option.   I believe we are the best source for information for student loan borrowers.   Feel free to contact the office to set up a consultation.

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