Should I Let My Student Loans Go to Collection?

Short Answer: NO!!!!!!!!!

There is not a whole lot more to say then that, letting your loans go to collection is not smart. The rules vary, however, when it comes to private student loans and federal student loans.

Federal Student Loans

Federal student loans are backed by the government, so when if default on the loan the government reimburses the bank. The government, now responsible for you debts, will now deal with you. The United States Department of Education Default Resolution Group will be the one who deals with you. They will help you try and figure out a repayment plan. Today there are more options for students in default then there have ever been. If your default problems continue the worst could happen:

• Your loan amount could be taken out of your wages
• Your federal and state income tax returns could be denied to you
• The loan amount could be taken out of your social security benefits
• You could get sued for the cost of the loan

Private Student Loans

You should never let any of your loans go to collection, it will destroy your credit score and ruin any chance you have of getting another loan, or at least getting another loan at anything close to a reasonable interest rate. A private lender can take you to collection as well and may not be as understanding as the government. Private lenders can also garnish your wages and take you to court. Private lenders can not access your taxes or social security benefits like the government can, but they can be much tougher on you then the government.

What to do?

Don’t let your loan go to collection. If you have to realize you can get help from the government when it comes to repaying federal loans. Try and work things out with a private lender if you went that route. The bottom line is try your best to make your payments on time.

Additional Resources:

• FinAid- Defaulting on Student Loans
• Federal Student Aid Collections Guide