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And to make it worse student loan collectors have
special powers that can make your life a misery. Fortunately federal
law provides a variety of options that will aid your credit repair
effort, help you stop collectors, and even come out ahead!
It's Up To You
If you take
action you can stop collectors, reduce your payments, and have the
default status removed from your credit. But you have to initiate
these efforts. If you don't take action no one will help you and the
situation will get worse. Are you are involved in a credit repair
program? You have everything to gain by acting today. Let's take a
look at the powers the government has, and then explore the tools
that you can use to put an end to the hassles once and for all.
Say Goodbye to
Your Tax Refunds
If you are in
default and have a tax refund coming you should expect it to be
taken by the government. This is a virtual guarantee. If you want to
avoid this action while you determine your options, you should act
today to eliminate your next tax refund so that there is nothing to
seize. This is easily done. Just decrease the amount of income
withheld by your employer, or reduce your estimated tax payments if
you are self-employed.
The Paycheck
Surprise
Student loan
collectors now have the right to garnish your wages without a court
order. At the moment they are allowed to seize the lesser of 15% of
your disposable income, or the amount of your disposable income in
excess of $154 per week.
Social Security
is Now Fair Game
In 1996 a law
was passed allowing student loan collectors to seize the Social
Security income of student loan defaulters. But there are limits to
the amount that can be seized. The first $9000 per year, or $750 per
month, is safe. And under all circumstances there is a limit of 15%
of your total benefits that can be taken.
Cancellation of
Student Loan Debt
It is
theoretically possible to cancel your student loan debt if you had
serious trouble with your school (such as it closing down while you
were enrolled), if you became totally and permanently disabled after
you took out the loan, or by convincing a judge to dismiss the debt
in bankruptcy. If you pursue one of these options you should expect
to be faced with extreme documentation requirements and slim odds of
success. I'm sorry to say that after almost twenty years of
counseling people on credit repair I have never seen anyone succeed
in canceling their student loan debt. Fortunately there two easy
methods of resolving your student loan problems that will help you
stop collection efforts and establish a reasonable, affordable
payment plan.
Student Loan
Consolidation
There are two
types of consolidation plans available based on the type of student
loan you have. Most student loans are either FFEL loans (Federal
Family Education Loans) or Direct Loans. FFEL loans are given by
banks or institutions and guaranteed by the government, Direct Loans
are obtained through your school, but come directly from the
government. Stafford Loans, Guaranteed Student Loans, and Plus Loans
may be either FFEL or Direct Loans. The FFEL plan requires that you
pay at least the interest due each month. The Direct plan has no set
minimum. You can qualify for the Direct plan if you have at least
one Direct Loan, even if all of the others are FFEL loans. Are you
in a
credit repair program and considering your options, but are
concerned about your budget? Both plans offer the possibility of up
to three years forbearance (no payments) after consolidation.
Rehabilitation
Rehabilitation,
unlike consolidation, will not allow you to combine your existing
loans into a single new loan, but it does have the benefit of
eliminating the default status from your credit report, which makes
it attractive for those in
credit repair programs. Like consolidation you have the right to
request a payment plan that is affordable to you. Rehabilitation
requires a trial period where you will be expected to make nine of
your next ten payments on time. Once you have completed the trial
period your loan will be sold to a new lender and the default status
removed from your credit report.
Getting Started
Before
approaching your lender or collector to discuss your choices I
strongly recommend that you contact one of the resources established
to provide guidance on these issues. Please contact the Student Loan
Ombudsman Office at (877) 557-2575, or the Federal Student Aid
Information Center at (800) 4FED-AID to discuss your rights.
Copyright ©
2007 James W. Kemish. All Content. All Rights Reserved.
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About The
Author
Jim
Kemish, a nationally recognized
credit repair and restoration expert, is the
president and founder of Sky Blue Credit, a leading
credit repair business since 1989. Jim is also the
president of Power Mortgage, a
Florida mortgage company based in Delray Beach,
Florida. |
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