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“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Archive for September, 2012
Written by Craig D. Robins, Esq.In an interesting cover story this week, the New York Times wrote about Debt Collectors Cashing In on Student Loans.
Apparently, debt collectors have become very excited at the prospect of working for student loan lenders, and see great profits in chasing consumers on student loans. So even though many borrowers are suffering and struggling to pay off their student loans, the debt collection industry is cashing in.
The article mentioned that the number of individuals who have taken out student loans in recent years has exploded, and so has the number of who have fallen seriously behind.
If you are behind with a student loan, you are not alone. About one in six borrowers with a student loan is in default. That’s almost six million Americans!
What You Can Do If You Are Behind on a Student Loan
Most consumers who are delinquent on student loans also have a substantial amount of credit card debt.
However, the difference between student loan debt and credit card debt is that credit card obligations can be discharged in a bankruptcy whereas student loan debts cannot.
If a consumer is just barely getting by and trying to pay a little to each creditor, then they would be much better off eliminating their credit card and other dischargeable debts, so that they can then concentrate on a repayment plan with the student loan.
Almost all student loan lenders will work with a delinquent borrower to create a long-term payment arrangement, often based on the amount of the borrower’s income.
While it may be possible to hide from bill collectors chasing down credit card debt, it is not so easy when it comes to student loans, which are backed up by the federal government. Unlike credit card companies, the federal government has extraordinary collection tools such as seizing tax refunds and garnishing paychecks and Social Security payments.
Also, unlike a statute of limitations for collecting credit card debt, which is six years in the state of New York, and fewer years in some other states, there is no statute of limitation for collecting student loans
Bottom Line: If you owe student loans, you will likely end up paying them back at some point or another, but if you can eliminate credit card debt in bankruptcy if you qualify.
