Tips to Get Out of Student Loan Collections

Posted by Isabella Elmore on June 18th, 2019

A loan does never disappear by itself. You have to make repayment as and when you are required to pay off to get rid of the financial burden. Any default on your loan may compel your lender to authorize a debt collection agency to get the money out of your pocket.

Student loans in Ireland are cheaper and affordable than any other type of short-term loan. However, missed repayments can cause you late repayment fees, penalties, and above all damage your credit score. Once your debt has fallen in the collection, you will start to receive barrages of calls and notifications. You may choose to avoid answering the call, but you cannot escape your debt unless you have cleared all dues.

Education loans go in default if you fail to pay off your installment within 270 to 360 days. However, it does not mean that your life is over and you cannot get out of it. Once the debt falls into a collection, you will have to pay the fees into the bargain that may vary from 18% to 40%. Now you can think about how much it may set you back. Consequences do not end here. They will garnish your wages. Income tax refunds will be used to repay your debt. You will no longer be eligible for federal financial aid that continues unless you have made six on-time repayments. You will have refrained from student loan deferment and subsidized interest benefits. You may not be able to apply for a loan as the default shows up on your report for up to 7 years. Sometimes collection agency uses hard tactics to get money out of your pocket. Make sure that you know the fair practices of collecting the debt.

Here is how what you should do when your loan is in collection:

Student consolidation loans

The moment you consolidate your student loans, you will stop receiving calls from the collection agency. Now you will have a larger loan rather than several. It is a great option to quickly get out of the loan but not suitable for everyone. Consolidation will allow you to pay your debt at a lower interest rate. Further, you can apply for these loans when you cannot qualify for deferment. You will not be able to consolidate your loan if you already have a consolidated loan or you are on active wage garnishment.

Talk to your lender

It is important that you keep your lender in the loop when you are struggling to repay your debt. Your lender and the collection agency must know about your tight financial condition. They may allow you to have exclusive offers on student loan repayments. After considering your financial condition, the lender may allow you to pay the minimum amount or may extend the due date. If you do not discuss it, they may infer that you do not want to take your financial obligation seriously.

Rehabilitate your loan

Rehabilitation involves a mutually agreed-upon plan that is affordable for the borrower. The plan requires you to make 9-10 monthly installments to have the default removed and stop the involvement of a collection agency. The lender and the collection agency will determine the rehabilitation repayment after considering your income statement. If the payment is not affordable yet, you can submit an affordable payment plan. Rehabilitation is usually more beneficial because you are eligible for forbearance or applying for a new loan. The default will not show up on your credit report and the role o agency will come to end.  

Try to pay immediately in case of a default

If the due date has slipped through the cracks, you should immediately catch up on the repayment. This will cause you late payment fees but at least the collection agency will not badger you. You will get back on the track. If it is difficult to keep up, you should switch to another repayment plan.

Declare bankruptcy

The last resort is proving bankruptcy. However, it might be a bit difficult to get rid of these loans through it. You have to demonstrate that you are not able to continue to work due to some reasons, for instance, medical condition. You cannot get rid of them unless you prove that you are even struggling to make ends meet. This can have a very big impact on your financial condition. Make sure that you are using this option when all others fail.

Once you get out of student loan collection, make sure that you do not miss any repayment down the road.