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Education is important to anyone who wants to prosper career wise in this current generation. A lot of jobs need real competent workers and only academic qualifications and experience can ensure there is competence in a person. Students who study in institutions of higher learning are subject to payment of heavy tuition fees to cater for their education. Those whose parents are not able to manage to raise these huge sums of money usually resort to acquiring loans from their respective governments to help them settle school bills. However, it is worth noting that students go through many challenges when settling these debts, misrepresentation by collectors being the main issue after the loans have defaulted.
A loan goes into default when it has not been paid for a certain period of time, usually between two hundred and seventy and three hundred and sixty days. Students’ loans have a grace period over which the amounts have to keep being settled. Failure to pay anything during this period leads to the government defaulting the loan, meaning that the debt will require being settled immediately rather than over a given time frame as it was previously. In this state, a collector comes into the picture to service the process. This is what in most cases becomes problematic to those holding the debts.
The government normally has access to agencies, who work on collecting debts from the students who acquired loans during their years of studying. These agencies act as the link between the borrower and government. They take charge when a student’s loans have defaulted, and they employ all their efforts to ensure the debts are paid. Sometimes they can use certain tactics that do not down well with the borrowers. This calls for the borrowers’ need to know their rights and responsibilities to avoid being exploited. Understanding one’s legal rights regarding debt collection makes it easier dealing with these agencies who carry out collections.
The implications of defaulting a loan are severe. Once the loan is in default, a collection fee of between eighteen and forty percent of the outstanding balance is levied. In this state, a person’s eligibility for federal financial support becomes questionable. Their wages, if they are working, can be garnished in favor of paying the outstanding loan. A further disadvantage of a defaulted loan is that they will be indicated in the borrower’s credit reports for up to seven years. This limits their ability to acquire another loan in future due to the poor scores of creditworthiness. Ineligibility for loans deferment becomes likely too.
It is important for the borrowers to know their stand in such situations, according to the law. Being aware of the laws makes them realize how much they owe the government and how often the collectors can contact them. Some agencies harass their clients by threatening them and issuing tough deadlines. This is exactly what causes problems to beneficiaries of the students’ loans. The students have their share of responsibility, as well as the debt collectors. The fear of being arrested if the debt is not paid, a lie created by many agencies is what is mind-blowing to the debtors.
However, there are several ways to ensure those who benefit from students’ loans do not find themselves in situations where loans have to be default. Rehabilitation is critical. This involves making arrangements with the department of education, over a payment plan. This is an arrangement that comes along only once. If the affected cannot use this chance to clear the default, it is impossible to rehabilitate for the second time. A loan becomes rehabilitated when the required number of payments are made within the correct time frame, failure to which the loan will not be rehabilitated.
Consolidating student loans is also a way out of defaulted loans. Consolidation involves bringing together the many different balances of loans, the defaulted loans inclusive, and treating them as one. The good thing about consolidating is that the periodic payments become one. Before combining these balances one is expected to remit payment for different educational loans separately. But with this plan in place, the payments are structured in a way as to allow the borrower as once for every period. This method is effective if the affected can meet the necessary condition of doing a three-consecutive timely payment prior to the consolidation.
Students can as well discharge their loans with bankruptcy. This is somehow difficult but it can be done if the correct procedures are followed to the latter. Discharging loans is an act that occurs when one can prove that their income is too low to help them settle the debts they are owed. People who earn sustainable incomes can also apply for this if their loans exceed a limit they can bear, with their salaries. Student loans were initially not permissible for this action but with changes in the law, this can still happen. If a student can be able to prove that they are experiencing hardship that is undue in paying these loans.
Repaying the whole amount that is due counts as another option. This is kind of difficult because most of these loans are usually huge. However settling them at once is a better option because the problem is permanently resolved. This can be done through surrendering property whose net worth is equivalent to the value of the loans. Assets like vehicles, lands and buildings of high value can always prove helpful when it comes to settling fully, the owed debts. This method looks unattainable but that does not mean that it cannot work. With proper planning and evaluation of one’s owned assets, this is achievable.
The collection status of a defaulted loan is also removed via making payments as quickly as possible, immediately the situation commences. Making payments that meet the desirable criteria as per the law makes the borrower relinquish the collection status. If the payments meet the requirements that means that the delinquency of not paying anything in two hundred and seventy days disappears. This method is effective if someone is sharp enough to conquer the challenge of time. Failure to which, the collection status will remain as it is with the procedures stipulated in the law being put into consideration.
Doubters may ask if consolidating a loan would make sense since it is merely merging the total loans owed. This creates a lot of meaning because bringing these balance together will mean that this is a new plan altogether. The periodic remittances will have to be recalculated to determine the amount a student will be obligated to pay in this new arrangement. In the previous plan before consolidating, one will be required to pay separately for each loan repayment having its own terms. With the balances brought together, it is like dealing with one as the terms will not vary because the settlement is being done as a whole.
Repaying the loans fully may also be questionable for people who do not have a lot of cash. Paying the whole loan does not necessarily require one to have the whole lot of cash with them. A house or home can be sold if the affected have a bigger apartment that can sustain them even if they sell part of it. Owning land can further be a better cure for this. Since land has a high value, issuing it to the government can be a solution to settling the debts fully. Similarly, plans can be devised between the government and the borrower to secure a collection of the property of the relatives of the affected if they can agree until the required value is reached.
With the dynamics in law, students can as well discharge their loans in bankruptcy. People may argue that since this was not initially included in the law, it might not be a better solution. But on scrutinizing this option in depth, you find out that a student is required to prove that they are indeed going through a hardship that they can barely raise amounts to clear their loans. With the number of graduates finding their way to the job market it is pretty likely that some of them will miss jobs and with their backgrounds humble, they will be overburdened when it comes to repaying these loans.
It is, therefore, important to note that student loans come with different challenges and need the students to be well equipped to get through them. Their source of power is in understanding their rights and responsibilities based on what the law directs. Loan issuers and debt collectors on their hand should also maintain good service to avoid putting students into difficult situations.
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