Student Loan Collection
Introduction:
Though the term student loan is included in financial aid, it differs from grants and scholarships . The difference between them is that loans must be paid back. There are several varieties of student loans. The first type is when the loans are made directly to the students. There are no payments that are to be made till the enrolment status of the student is half time. If the status of the student falls below the half time then the account falls in the category of grace period which is given for of six months . The loans are deferred if the student re-enrolls with a status of half time .
There is no provision for a second grace period if the student drops below the half time again . The amount of loans given is limited. In case the parents apply for student loans then the limit is higher and the payments start immediately . If private student loans are provided to either parents or students then the limits are higher and no payments are to be made till graduation, however the interest begins to accrue immediately . The private student loans can be used to incur additional expenses like tuition, books, room rent and computers .
Loan collection:
In case the student falls behind the payments the education department has several tools that are used against those that do not make the payments . If a student defaults on student loan then the amount paid is in excess than the amount borrowed . There are high collection fees that are charged by agencies of loan guaranty . Moreover the education department is charged a commission by collection agencies and this amount is passed on to the consumers . Thus in the end the consumers have to pay not only more than the amount borrowed but also collection fee and commissions .
If the borrower is entitled to any income tax refund then the education department can intercept it till the student loan is fully paid . This is the most popular method of collecting student loans. Every tax year the agency that holds the loans reviews the accounts of the borrower to verify whether loan payments are made in the last 90 days. If there are no payments made then the agency informs the concerned department .
The education department and the agency that guarantees the student loan are approved to garnish or take a portion of wages of a student loan defaulter . Up to 15% of income deposited may be garnished by the education department and the guaranty agency . This provision may be challenged in writing to the department or the guaranty agency if the borrower after being laid off or fired has found a work within 12 months . In the last 12 months if the borrower has been continuously employed objection can be raised when the tax refund is intercepted . In case of extreme financial hardship an objection against can be filed . An additional way to evade garnishment of wages is to get in touch with the possessor of the loan and agree to a schedule for repayment.
Other Articles
