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Resolving Student Loan Defaults

Experienced Student Loan and Default Attorneys in South Florida

A default of a student loan occurs when a borrower fails to make his or her payments as scheduled according to the terms of the promissory note, which is the binding legal document that the borrower signed at the time that the loan was taken out. There are different ramifications to a student loan default, depending on whether the loan is a federal loan or a private loan. To resolve these defaults, you need the help of a reliable, skilled attorney from our firm.

Contact LSS Law today to discuss your case with our attorneys in a consultation.

Federal Student Loan Delinquency

A federal student loan becomes delinquent on the first day after you miss a payment. The delinquency will continue until all payments are made to bring the loan current. Loan servicers may report the delinquency to the three credit reporting agencies after a delinquency of 90 days, which can negatively impact your credit score.

A borrower with a delinquent federal student loan has several options to avoid default, such as consolidation, switching repayment plans, deferment or forbearance. Sometimes, though, borrowers cannot avoid default. The rules are complicated and sometimes finding the right course of action can be daunting, which is why you could benefit from professional counsel and representation. Our lawyers at LSS Law can help you find a workable solution to resolve student loan defaults.

When is a Student Loan in Default?

A federal student loan is considered in default after you fail to make a payment for 270 days. There is no statute of limitations for a federal student loan, so doing nothing will not cure the default.

The consequences of student loan default include:

  • The entire unpaid balance of the loan, and any interest, becomes immediately due and payable.
  • You lose eligibility for deferment, forbearance, and repayment plans.
  • You lose eligibility for additional federal student aid.
  • Your loan account is assigned to a collection agency.
  • The loan will be reported as delinquent to credit bureaus, damaging your credit rating.
  • Your federal and state tax refunds may be withheld through a tax offset. This means that the Internal Revenue Service can take your federal and state tax refund to collect any of your defaulted student loan debt.
  • Your student loan debt will increase because of the late fees, additional interest, court costs, collection fees, attorney’s fees, and any other costs associated with the collection process.
  • Your employer (at the request of the federal government) can withhold money from your pay and send the money to the government. This process is called administrative wage garnishment.
  • The loan holder can take legal action against you, and you may not be able to purchase or sell assets, such as real estate.
  • Federal employees face the possibility of having 15% of their disposable pay offset by their employer toward repayment of their loan through Federal Salary Offset.
  • It will take years to reestablish your credit and recover from default.

The lawyers at LSS Law can help you get out of default. The three most common ways to get out of a federal student loan default include:

  • Loan consolidation. In many situations, you can cure your default by consolidating your federal student loans, if eligible, and by agreeing to immediately begin an extended repayment plan, which will allow you to cure the default.
  • Loan rehabilitation. To rehabilitate your default, you generally must make nine payments within a ten month period, allowing you to cure your default. In some situations, such as an administrative wage garnishment, this is the only way to get out of a student loan default. Rehabilitation also allows the default notation to be removed from your credit report.
  • Loan settlement. Another option to get out of default is through a loan settlement. Usually, a lump sum payment is required and the federal government has strict guidelines on the amounts of the settlements that can be achieved.

LSS Law have experience dealing with each of these methods of curing a federal student loan default.

Understanding Loan Defaults

Private student loan defaults are more problematic than federal loan defaults. A private student loan default is governed solely by the promissory note and related agreements between the borrower and the lender. The federal government programs described above are not available for private student loan borrowers, they must find alternative resolutions.

It is important to note that private student loans do have a statute of limitations, which means after a period of time, and under certain circumstances, the loans can expire. Furthermore, a myriad of defenses are generally not available to borrowers of federal student loans. Finally, the remedies that student loan lenders have against private student loan borrowers are generally less strict than federal student loan lenders, and

LSS Law understand that every situation is different, making the need for an experienced student loan law attorney even more valuable. We have more than 80 years of combined experience and we are available to help with even the most complex issues.

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