student loans: "the elephant in the room"
After student loans surpassed credit cards in total debt in the U.S., it is important to now consider the potential effects of this huge burden largely placed on our youth.
Many Americans in their early twenties are now starting life with a financial deficit at a growing rate. In some instances, these young adults have graduated college with a mortgage-sized debt load and have no income with which to pay it. However, unlike a homeowner who cannot afford a house, the student loan debtor cannot just surrender his or her diploma to lessen or resolve the debt. If you have no income, a deferment or forbearance may be the only immediate relief. However, normally the interest will continue to accrue during these payment relief periods – putting you deeper into debt. For federal loans, there are income-based repayment options, but usually you must be current to participate in those plans.
This enormous student loan debt has created a lack of disposable income among millions of young Americans. As a result, money that would normally be spent to bolster the retail economy, investments in stocks/bonds, or even the real estate market is going towards student loans. Over the next decade, as baby boomers enter advanced age, these effects will become more apparent as student loan debtors are not able to afford or even qualify for mortgages.
It would seem as though these young adults are shackled with their student loan debt until paid or until Congress passes appropriate legislation to re-allow student loan discharge in bankruptcy (without the necessity of proving “undue hardship.”) However, student loan debt can still be managed and paid back in a bankruptcy, and sometimes the loans can be paid off quickly.
A Chapter 13 Plan will allow the student loan debtor to pay back all or a portion of their student loan debt. Some advantages of a Chapter 13 repayment plan are that it prevents all collection activity (calls, garnishment, etc.), allows you to keep a portion of your income for living expenses, and pays back your student loan debt under modified terms. However, you must have a relatively steady income to participate in this type of repayment plan. If your student loans are too expensive and have become unmanageable, contact an attorney today.
Student loans- the facts
- Missed or late payments result in collection actions: calls, letters, and emails.
- If collection calls and notices don’t work, then the student loan servicer may sue you for a judgment.
- The Fair Debt Collections Practices Act (FDCPA) prevents deceptive, abusive and harassing collection tactics by debt collectors.
- Your student loan servicer is a “debt collector” under the FDCPA if it did not provide you with the original loan.
- With a judgment, the servicer can garnish your wages, take money from your bank accounts, and put a lien against your property.
- Under Tennessee Law, professionals can lose their licenses for defaulting on student loans. Public Acts, 1999. Chapter No. 476
- Sallie Mae is the nation’s largest student loan servicer and owns an estimated 20% of all outstanding student loan debt.
- Sallie Mae accounted for almost half of the complaints submitted to the Consumer Financial Protection Bureau regarding student loans in 2012.
- In 2014, Sallie Mae had to pay the Department of Justice $60 million for cheating active duty military troops out of their rights under the Servicemembers Civil Relief Act.
- Servicers of private student loans cannot take your tax refunds or disability benefits, but they can for delinquent federal student loans.