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Today more than 44 million Americans have outstanding student loan debt, which has become one of the biggest consumer debt categories. Student debt in the U.S. now totals more than $1.5 trillion and is now the second highest consumer debt category behind only mortgage debt and higher than both credit cards and auto loans. For many young Americans entering the workplace, their first job will also bring with it the first payment on tens of thousands of dollars of student loan debt, debt that can take them decades to pay off. The average college debt among student loan borrowers in America is $32,731, according to the Federal Reserve.

Student loan default generally occurs on your student loans when you do not make a scheduled payment on your student loan for a period of at least 270 days. Once your student loan defaults, the status will be displayed on your credit report. Negative remarks on your credit report make it harder for you to get loans in the future.

Types of Student Loans

There are two types of student loans, Federal loans and Private loans. Federal loans have a fixed interest rate, usually lower than the interest of private loans, set annually by Congress. Some federal student loans offer income-driven repayment plans, where the rate of repayment is based on the borrower’s salary after college. Federal student loans allow the borrower to change their repayment plan even after they’ve taken out the loan.

Private loans have more options like fixed interest rates, variable interest rates, and income-based monthly plans whose interest rates vary depending on the lender, and on the credit history of the borrower and cosigners. Private loans are nonfederal loans, made by a lender such as a bank, credit union, state agency, or a school. Private student loans usually offer the choice of a fixed or variable interest rate. Fixed rates stay the same, giving you predictable monthly payments. Variable rates may go up or down due to an increase or decrease to the loan’s index. Private student loans offer different repayment plans, including options that allow you to make interest-only or fixed payments while you’re in school. These in-school payments could lower your total student loan cost.

Here is a list U.S. student loan servicers: Great Lakes Educational Loan Services, Navient, FedLoan Servicing (PHEAA), MOHELA, HESC/EdFinancial, CornerStone, Granite State – GSMR, OSLA Servicing, and Debt Management and Collections System.

Debt Collections

If your loan goes into default your loan may be sold to a debt collection agency. Once the debt belongs to a collection agency, the creditor will send the claim information and supporting documentation to the debt collector noting your failure to pay according to the terms of the agreement. After the claim is reviewed and accepted by the debt collection service, the recovery process begins with a demand letter being sent to the debtor and an acknowledgement letter being sent to the client with the name of original creditor who enlisted the collection service.

The Fair Debt Collection Practices Act is a consumer protection which provides legal protection from abusive/harassing debt collection practices. When a company violates the FDCPA we can offer free assistance with getting the calls stopped and potentially get you damages up to $1000.00 for the harassment. Below is a breakdown of what collection agencies CAN’T do.

This Act Prohibits Debt Collectors From:

  1. Asking you to pay more than you owe
    The collector cannot misrepresent the amount you owe.
  2. Asking you to pay interest, fees, or expenses that are not allowed by law
    The collector can’t add on any extra fees that your original credit or loan agreement doesn’t allow.
  3. Calling you repeatedly or continuously
    The FDCPA considers repeat calls or calls in excess of 7 times a day as harassment.
  4. Using obscene, profane, or abusive language
    Using this kind of language is considered harassment.
  5. Calling before 8:00 am or after 9:00 pm
    Calls during these times are considered harassment.
  6. Calling at times the collector knew or should know are inconvenient
    Calls at these times are considered harassment.
  7. Threaten to use violence if you don’t pay the debt
    Collectors can’t threaten violence against you.
  8. Threaten action they cannot or will not take
    Collectors can’t threaten to sue or file charges against you, garnish wages, take property, cause job loss, or ruin your credit when the collector cannot or does not intend to take the action.
  9. Illegally inform a third party about your alleged debt
    Unless you have expressly given permission, collectors are not allowed to inform anyone about your debt except:

• your attorney
• the creditor
• the creditor’s attorney
• a credit reporting agency
• your spouse
• your parent(s)(if you are 17 or younger)

  1. Repeatedly call a third party to get your location information
    The collector can only contact a third party once unless it has reason to believe the information previously provided is false.
  2. Contact you at work knowing your employer doesn’t approve
    A collector is not allowed to contact you at work if you’ve let them know your employer doesn’t approve of these calls.
  3. Fail to send a written debt validation notice Within five days of the collector’s initial communication, it must send you a notice include the amount of the debt, name of the creditor, and notice of your right to dispute the debt within 30 days.
  4. Ignore your written request to verify the debt and continue to collect. A collector can’t continue to collect on a debt after you’ve made a written request to verify the debt as long as the request was made within 30 days of the collector’s written notice.
  5. Continue to collect on the debt before providing verification
    After receiving your written dispute, the collector must stop collecting on the debt until you have received verification.
  6. Continue collection attempts after receiving a cease communication notice
    If you make a written request for the collector to cease communication, it can only contact you one more time, via mail to let you know one of the following: that further efforts to collect the debt are terminated, that certain actions may be taken by the collector, or that the collector is definitely going to take certain actions.

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