Student loan collection becomes inevitable if you can’t make the payments in a timely and adequate manner. Most people view loan collectors as the mean, bulky individuals portrayed in movies. In real life, the situation is a little bit different.
What happens in the case of student loan collection and is there something you can do about it? Keep on reading to find out.
What Happens When Your Student Loan Ends in Collection
Your student loan will end in collection after you’ve defaulted on it. A student loan usually goes in default if you haven’t made a payment for a period ranging between 270 and 360 days. In this instance, you’ll have collection fees applied on top of the loan (these can reach anywhere between 18 and 40 per cent of the outstanding balance).
Once the loan ends up in collection, your wage can be garnished, you may become ineligible for federal financial assistance and you will have serious issues with restoring your good credit history.
What’s even worse, the services of student loan collection companies may be employed. There are several options that you have when it comes to deal with loan collectors. Here are several of the approaches that can help you get out of the messy situation.
Require the Debt to be Verified
A debt collection agency is required to verify the debt before undertaking any actions against you. The agency has to give you information about the original creditor, the outstanding balance and your options for disputing the debt.
A debt collector is given a period of five days for providing all of this essential information.
Chances are that you’ll be contacted for debt that you don’t recognise. In this instance, you have the right to dispute it. During the dispute investigation, a collection agency will have no right to contact you.
Deal with Scare Tactics and Control Your Emotions
Debt collectors may employ various strategies to threaten you. Since these work in the vast majority of cases, debt collectors have gotten accustomed to utilising the approach. It’s very important to control your emotional response and make rational decisions in such unexpected circumstances.
As a borrower, you’re protected by the Fair Debt Collection Practices Act. Under the act, threats and harassment can’t be used for the purpose of debt collection. You may want to acquaint yourself with the act thoroughly because there is a long list of things that debt collectors aren’t permitted to do.
If any violation takes place during the debt collection process, you can file a complaint with the Federal Trade Commission (FTC). Before doing anything else, have a consultation with an experienced attorney that will be capable of representing you.
Negotiating the terms and conditions of student loan collection is one of the easiest things that you can do.
The role of the collection agency is to push you towards repaying the entire loan immediately. Chances are, however, that you’ll be capable of negotiating a payment schedule that gives you a longer period of time and is at least a bit more favourable.
If both parties agree to the terms, make sure that you get the agreement in writing to avoid any problems in the future.
Fees and Additional Charges
Your loan agreement lists the interest rate that a debt collector can charge. This amount is capped by state regulations. Always consult this document and compare the percentage to what the debt collector is requiring.
It’s possible for the collector to inflate the debt unreasonably. In such instances, you should contact the Consumer Financial Protection Bureau. The aim of the bureau is to resolve any issue you may have with the collector and to ensure fair terms and conditions.
Keep Record of Everything
Whatever happens, don’t go into panic mode. Keep copies of all student loan documents, as well as the written communication that you have with a debt collector. You may want to share all of this information with an attorney, especially if you have no idea what your consumer rights are.
Some people commit the grave mistake of throwing out loan documents after a certain period of time. If you happen to be in a dispute with a debt collection agency, however, these documents can save you from serious troubles.