Anonymous
Anonymous asked in Business & FinanceCredit · 11 months ago

Is there a key difference between defaulting on student loans and defaulting on other types of debts?

Look at it this way:

If I don't send in my mortgage payments, then the lender can foreclose on my house.

If I don't make my car payments, the lender can repossess my car.

If I don't pay my credit card bills, then my credit card company can cancel my cards and turn it over to collections.

But can the student loan company repossess my education or cancel my degree?

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  • Anonymous
    11 months ago

    If you are smart enough to get a degree you are smart enough to either get a scholarship or get a grant or other sources and default on your loan with no repercussions

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    • 11 months agoReport

      Who said anything about "permission"? You think you are gonna get treated fairly in business? You think you won't get ripped off being honest and hard working? I defaulted on $48k - never gave a flying f*ck about it and never been unemployed since I was 14 years old. Don't be a loser.

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  • 11 months ago

    Federally insured student loans cannot be eliminated by bankruptcy. The feds can take any tax refund you earn to pay on your loan.

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  • 11 months ago

    Idk im 15 but i use lumerit because this mukbanger told me to and she told me financial advisors make you pay for more classes so you'll stay longer and get the college more tuition but maybe you should vote for bernie sanders or something

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  • Anonymous
    11 months ago

    You're right that the loan provider cannot reposes your degree, but they can do things that will prevent you from getting loans in the future. Having bad credit can also prevent you from getting hired in a number of occupations, too.

    Furthermore, if you should file for bankruptcy, student loans are exempt from being forgiven. So even if you default by way of bankruptcy, you still owe the student loan.

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  • Anonymous
    11 months ago

    ................................

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  • Eva
    Lv 7
    11 months ago

    They can't repossess but they can garnish your tax refunds.

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  • 11 months ago

    Litigation

    One of the most severe consequences of student loan default is the possibility of a lawsuit.

    Federal student loan lenders, including the U.S. Department of Education, rarely sue defaulted student loan borrowers because the government has so many powerful collection tools at their disposal that don’t require a court appearance.

    However, it’s quite common for private student loan lenders to sue borrowers in state court because obtaining a judgment is often the only way they can go after a borrower's property or income. What a student loan lender can do depends largely on state law.

    Wage Garnishment

    If the student loan default isn’t ultimately resolved, the borrower may eventually be subject to wage garnishment for federal student loans. Federal lenders and the government can garnish wages “administratively.” This means that they don’t need to go through the court system or secure a judgment in order to take a portion of a borrower's wages. All they have to do is find your place of employment and give you notice that they are going to garnish, along with the opportunity to contest that proposed garnishment.

    Private student lenders generally don’t have quite the same powers. They have to first go through the court system – they must sue the borrower and secure a judgment. Only then can they potentially go after a borrower's wages – and their powers (or lack thereof) is determined by state law.

    Tax Refund Seizures

    One of the most powerful tools that the federal government has to pursue federal student loan borrowers is the ability to intercept your federal tax refunds. This is accomplished through a program called the Treasury Offset Program, and it allows the IRS to seize your federal tax refund and apply it to your federal student loan debt.

    This can be particularly destructive to lower-income borrowers who may need their tax refund to pay for routine living expenses. This can also be problematic for married couples who file taxes jointly; the couple’s entire joint tax refund can be seized, although in some cases the spouse that is negatively impacted by the seizure may have recourse by filing something called an “injured spouse's claim.”

    Luckily, as a general rule, private student loan lenders cannot take your federal tax refunds.

    Social Security Offset

    The Treasury Offset Program isn’t just about federal tax refunds. The program also allows the federal government to seize a portion of your Social Security payments in some cases. This can have a devastating impact on older borrowers who are often on a fixed income.

    Just like with administrative wage garnishment, borrowers are entitled to notice and an opportunity to contest any Social Security offset before it takes place. And under most state laws, private student loan lenders cannot go after a person's Social Security benefits through the state courts.

    The Bottom Line

    Defaulting on student loans can have very serious and lasting consequences, upending a person's life. But the good news is borrowers may have options to get out of default.

    For federal student loans, there are statutory programs available (like rehabilitation or consolidation) that can allow borrowers to cure their defaults, restore their loans back to good standing, and start repairing their credit.

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  • Anonymous
    11 months ago

    If you have federal student loans, the federal government can instruct your employer to garnish your wages WITHOUT GOING TO COURT.

    So yes, that's a key difference between defaulting on other kinds of debt.

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  • 11 months ago

    No but Defaulting on any student loan can have very serious - and very guaranteed - negative consequences, including late fees, collections costs, credit damage, and collections efforts." Private lenders will often sue their borrowers who default on their student loans

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  • Judy
    Lv 7
    11 months ago

    no, but they can take your federal and state tax refund

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    • John11 months agoReport

      That's the least of what they can do. Not getting the tax refund is just the beginning, it will only get worse from there.

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