Government Sues for Student Loan Repayment

Rising college tuition costs force an abundance of students to rely on Federal student loans. When it comes to repaying those loans, American borrowers are defaulting at an increasing rate. The United States Department of Education is taking action to get their money by suing persons who owe large loan repayments to the government.
“Defaulting” on a loan occurs when a borrower fails to make payments as determined by the loan agreement. This is different from “deferring” a loan; an option used by many students to postpone the repaying of a loan. It is not uncommon for student loans to come with a deferment option for a certain period of time. When deferment time is up and the borrower does not pay, the loan becomes “delinquent”. After a period of delinquency, the loan goes into “default”. When a loan defaults the lender has legal power to obtain their money. In the case of federal student loans the lender is the United States Government.

The Department of Education reported 238,852 loans in default between 2006 and 2008. The rate of loan default has been steadily increasing since 2006, hitting 7 percent in 2008. Outstanding loans of more than $45,000 are addressed by referral to the United States Justice Department. Suing for unpaid loans can include wage garnishing, access to bank accounts, personal property, etc. Parents who have cosigned on their student’s loan may also be targeted and held responsible in the effort to receive payment.
Department of Education representative Jane Glickman attests that suing for repayment is a last ditch effort. “We try to do everything possible to come up with a repayment plan before taking the step of seeking a lawsuit,” Glickman told USA Today.
Borrowers who owe less than $45,000 are not off the hook. Private legal companies are contracted to pursue loan repayment. The Department of Education has reported obtaining 11.3 million dollars in loan repayments from implementing legal action since 2006.