Student Loan Rights

• Author: Daniel A Edelman
• Profession: Lawyer
• Pages: 43-44

43

Student Loan Rights

CHAPTER

11

Recent student loans are not dischargeable in bankruptcy absent a strong showing of hardship. Older

loans may be subject to different rules. In addition, some federal student loans are exempt from statutes

of limitation. The latter depends on the program pursuant to which the loan is created and the holder of

the loan (20 U.S.C. §1091a).

In the case of federally guaranteed student loans, draconian collection methods may be used that

are not permitted with other debts. These include administrative wage garnishment, implemented with

notice and an opportunity to object but without a court proceeding and judgment; substantial default

penalties (the Department of Education allows collection costs of 25 percent or more on student loans

and permits the collector to charge an amount that passes on the entire collection cost to the borrower

and leaves the holder with the principal and interest owed); and interception of tax refunds and Social

Security payments.

There have been rampant abuses

with for-profit private schools and

private student loans. For example,

in February 2015 the Consumer

Financial Protection Bureau (CFPB)

announced a consent order with

for-profit Corinthian Colleges Inc.

that will forgive hundreds of millions

of dollars in private student loans.

There are programs for forbearance,

deferment, consolidation, and rehabilitation of federal student loans, as well as programs for repayment

tied to income or that take your financial circumstances into account. There are also programs for debt

forgiveness for teaching, military service, and public service work. Income-based repayment is something

that will benefit many borrowers, and you should ask about it. Lenders should, but might not, volunteer

NOTE

There are around 7 million

Americans currently in default

oftheir student loan debt.

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