Student Loans: A Debt That Can Haunt You

Student loans are one of the few types of credit that can haunt you almost forever. When it comes to taking out credit cards and loans, there are rules that all lenders must abide by, but many of these "normal" rules do NOT apply to student loan lenders. With most lenders they cannot legally sue you or take control of your assets (bank account, lien, etc) once the debt is past your state's statute of limitations (SOL). For some states this is as short as 3 years after the debt's date of first delinquency (the last "30+ days late" before the debt was charged off or sent to collections) and for others it can be as long as 15 years. Additionally, creditors are also not supposed to report the account on your credit report longer than 7 years after the debt's date of first delinquency. Now, the SOL on your debt will depend on your state's laws, but the 7 year reporting period is the same for everyone. With student loans, these protections are slim to none.

When to comes to student loans, you can be legally sued for the debt until it is paid. As a matter of fact, most of the time an actual court date and appearance are not even necessary. It is now more easy then ever for a student loan lender to gain access to your bank account without even notifying you first. Another possibility, and probably even more popular than grabbing funds from a bank account, is to have your paycheck garnished. This would happen in much the same way as it would for a child support debt or any other 'special debt'. This can be a surprising event when it happens, and can put you in a hard position when it comes to paying your other bills -- especially if you normally have little to no money left over after your usual bills are paid.

The best thing to do is to keep up on any student loans that you have. Student loans are structured to help the debtor out as much as possible. This is one reason why the laws are lenient when it comes to collecting these debts. First off, many lenders will only require you to pay $50 or so per month, especially if it is back by the Department of Education. Secondly, you can file for deferment if your situation qualifies for one. If you are now back in school, you can qualify for a deferment. If you are on public assistance, you can qualify for a deferment. You can check with your lender for a full list of deferment options that are available to you.

Lastly, if you are already in collections for your student loans, you may be able to 'rehab' them. This is a privilege that you have to specifically inquire about. No one will offer it to you and if you pay without looking into this option, you may be punished for it via your credit report. This is because, if you do rehab, the collection listing on your credit report will be removed once rehab is complete. If you pay without going through rehab, the collection listing will stay on your report for 7 years. Even if you cannot defer or rehab, taking care of your student loan debt as soon as possible is the best choice for any debtor.