When repaying a Federally Consolidated Loan, you may choose from multiple repayment plans such as Graduated, Extended and Income-Based with various term selections.
The consequences for defaulting on student loans is devastating after 9 months of non-payment such as-immediate increase in the interest rate of your student loans up to 18.5% in addition to fees added by collections agencies-Immediate loss of your Title IV Financial Aid benefits-Negative reporting to the three credit reporting agencies-Withholding of your federal income tax return by the IRS to repay the defaulted student loans-Administrative Wage Garnishment of up to 25% of your paycheck and this is in addition to the IRS taking your tax returns every year. Getting out of default can take 4-8 weeks or even 9 months depending on what methods use.
An Administrative Wage Garnishment (AWG) is an action taken by the guarantor of your Federal student loan to recover payment on your defaulted student loan or loans by ordering your employer take up to 15-25% of your wages per pay period. Your employer cannot ignore this order or they face possible fines for every non-compliance incident of the order.
There are several options. One is settling of your loan or loans with a full repayment of the loan or loans. The settlement amount will be equal to no less than 95% of the payoff amount. Your outstanding loans can also be paid off through a Federal Loan Consolidation based on certain lenders and criteria. You may also need to work out satisfactory repayments with your lender/lenders to get the loan out of garnishment status. Unlike credit cards or any other type of private lender debt, Federal student loans cannot be included in a bankruptcy.
Unfortunately, student loans cannot be discharged because you feel your institution provided a poor education or had unqualified instructors or inadequate equipment. The U.S. Department of Education does not endorse the school's educational programs or guarantee that the school will deliver the services for which a student contracted. Therefore, this discharge cannot be granted if the school did not provide job placement or other services that it promised, or if you were not able to find a job in your field of study.
Part- Two of this series will be released 3/31/2012
Financial Management Institute, Inc
Kenneth Grayer CEO & President
kgrayer@teamfmi.com
