Compass Student Loan Remedies
Frequently Asked Questions
Q - Can you explain the definition of a defaulted student loan?
A - If you have not made any payments on your student loans for a period of time or arranged for a cancellation, deferment, or forbearance, your loans have been placed into default.
Q - Can the government garnish my income if I have defaulted on my student loan?
A - Yes. The Department of Education and the guarantee agencies are authorized to garnish a percentage of the wages of the student loan debtor, if the debtor is currently in default.
Q - I have heard the government can take my tax refund if I have defaulted on my student loan. Is this true?
A - Yes, the program is called the Treasury Offset program. The IRS can intercept your income tax refunds until you pay off your student loans.
Q - I am an Active Duty member of the Armed Forces currently deployed overseas. Are there any programs available to help me with my defaulted student loan?
A - There are programs for certain members of the Armed Forces. Depending on the time you served and the type of loan(s) you have, you may qualify for this type of assistance with your loan.
Q - I am a current recipient of Social Security benefits. Can the government garnish my benefits?
A - Congress passed the Debt Collection Improvements Act in 1996. The Act gave the Department of Education the ability to withhold certain federal benefits to pay back defaulted student loans. These benefits include: Social Security Retirement, Disability and Supplemental Security Income.
Q - Should I sell a major asset to pay off the student loan I have defaulted on?
A - Not necessarily. Many major assets are protected from student loan collections. It may depend on your individual financial position. Our student loan specialists can help you determine if this is a sound financial decision for you.
Q - Should I withdraw money from my 401K to pay off my defaulted student loan?
A - Generally, it is not a good idea. This will depend on the interest rate you will have to repay with your 401K repayment plan. Typically, you have to repay your 401K loan within five years. The payment could end up being higher than the amount you were paying to your student loan.
Q - Should I take out a home equity loan to pay off my defaulted student loan?
A - This is generally a bad idea as well. The government is limited in how it can collect on your student loan. Student loans are unsecured debt, whereas the home equity loan holds your home as collateral. Taking out a home equity loan could mean risking your home if you could not make the payments.
Q - What will happen to me if I do not pay on my defaulted student loan?
A - Initially, collection agencies will attempt to contact you through the mail and by phone and your default will be reported to the credit bureaus. If you continue to ignore the loan holder's attempts to contact you, they will get more aggressive. Collection fees will be assessed against you and end up costing you more than the amount of your loan. Your tax refunds may be intercepted - both state and federal. Your wages may be garnished, as well as any federal benefits you receive. Ultimately, the Department of Education has forever to sue you to collect on your student loans.
Q - Can my defaulted student loan show up on my credit reports?
A- Yes. Defaulting on a student loan is no different than not paying on your mortgage, a car loan or a credit card.
Q - Is there a statute of limitations for collections on loans prior to the Student Loan overhaul that occurred in early 2010?
A- According to Section 484A of the Higher Education Act, there is no statute of limitations which limits Department of Education's or the guaranty agency's ability to file suit, enforce judgements, initiate treasury offsets, or any other action to collect a defaulted student loan. For student loans prior to the 2010 overhaul, there is no statute of limitations that will allow you to wait out repaying your student loan debt.
Q - Is Compass Student Loan Remedies always able to get someone out of default?
A- Yes. Our goal is to assist everyone, however each person's situation is different and each solution is different. We will provide you with the options that are best suited to your situation by using the established programs available through the Department of Education.
Q - Can a defaulted student loan affect my professional license?
A- Yes. While your loan is in default, the Department of Education has the ability to suspend any professional license(s) you may hold.
Q - Will the newly revised Student Loan overhaul by the Obama Administration discharge my obligation on my defaulted student loan?
A- No. The Obama overhaul on student loans will not discharge any defaulted student loan notes you currently hold. This program was designed to increase the ability for consumers to receive additional grants, to reduce the padding of collections costs, bringing student loans back under government administration and out of the hands of private lenders, and to increase the number of Americans who seek to achieve a higher education. More information on the student loan overhaul can be found at www.whitehouse.gov.