Don’t run; you can’t hide.
Did you know that if you try to run from your student loans collection agencies can garnish your wages? That’s right — they can legally garnish up to 15% of your take home pay. The government can also intercept tax refunds, Social Security payments, or even money like this year’s stimulus check if you do not (or cannot) pay your student loans.
In some dire situations collection agencies can contact your employers and neighbors. Their attempts to collect can be harassing and embarrassing.
You can’t declare bankruptcy if you get overwhelmed, either. Student loan debt is not treated the same as credit card and other consumer debt. Student loan interest is tax deductible. However, that’s little comfort if you’re struggling to make payments.
So why is the system like that? Can anything be done about it?
Student loans are partly treated with severity because there is nothing for the lender to repossess if you default. With a car or home the bank can claim your property and re-sell if you can’t pay for it. But your brain? Lenders see this loan as more risky, and from that standpoint you can’t blame them.
However, there are some very real social ramifications that stem from excessive student loan debt. Gen X/Gen Y generations carry proportionately more student loan debt than our parents. Some have pointed out that this debt causes more of us marry later, have fewer children, and delay purchase of our first home. Excessive loan debt is forcing too many young adults to move away from low-paying but critical fields such as teaching and social work…a threatening situation to our nation’s strength and stability.
Who’s working to change things?
Alan Collinge is working to raise awareness of unfair practices in student lending and get policy changes made, too. He runs the website StudentLoanJustice.org. Here’s a great article about him in The New York Times. Says a Sallie Mae rep of Collinge:
“He’s had a lot of problems paying his loans back, and he’s spent an awful lot of time out there talking about his problems rather than trying to pay his loans back,” said Tom Joyce, a spokesman for Sallie Mae.
I think that sounds pretty harsh and ignores some of the larger issues with young people carrying too much educational debt. If you agree, head over to StudentLoanJustice.org.
Related:
Student-Loan Woes Hurt Upper Middle Class
Clock’s Ticking for Student Loan Applicants
If You Have Student Loans, Read This
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