It seems obvious that you do not want to default on your student loans, but outside of the usual reasons, there are three little-known reasons for avoiding default. The federal government has a wide-variety of collection tools that it can use to collect past due student loans. In fact, you might be surprised to learn that the government is not required to obtain a court judgment in order to use its collection tools, including:
- Offset of your tax refunds. If you are entitled to receive an income tax refund and your federal student loan is in default, the government has the ability to seize a percentage or all of your tax refund and apply it to your outstanding debt.
- Offset of federal benefits. If you receive federal benefits such as Social Security payments, the government can seize them. Other benefits that can be seized include those under the Black Lung Act and some Railroad Retirement benefits.
- Wage garnishments. A maximum of 15% of your paycheck can be garnished by the federal government and applied to your student loan debt. Unlike other creditors, a court judgment is not necessary, so this can be a detrimental shock for many borrowers.
Filing a collection lawsuit against you is also an option for the government. While rare, it will pursue litigation in certain circumstances.
Having a defaulted federal student loan can also make you ineligible to obtain a federal job. Additionally, your default can put your federal and/or state licensing in jeopardy. If your job requires you to hold a professional or vocational license, the governing board can refuse to certify you, or can suspend or revoke your member’s license. This can include professions in the healthcare industry, attorneys, teachers, insurance agents and other similar vocations.
If you are falling behind on your student loan payments and you need help preventing your loan from going into default, call us to schedule an appointment.
Contact The “Milwaukee Bankruptcy Attorneys,” DeLadurantey Law Office, LLC for all your Chapter 7 and Chapter 13 bankruptcy needs. Whether you need debt negotiations or debt relief, or even foreclosure defense, DeLadurantey Law Office will handle bankruptcy matters for the following locations – Milwaukee, South Milwaukee, West Milwaukee, Waukesha City, Waukesha Town, Kenosha, Racine, and all other municipalities in Milwaukee County, Waukesha County, Kenosha County, and Racine County. DeLadurantey Law Office, LLC can be contacted by phone at (414) 377-0518.