Debt Collection Services of the Department of Education

Failure to pay your student loans can have serious repercussions for your credit and finances. If your student loan gets sent to collections, you can expect increased collection efforts, damage to your credit and the possibility of the Department of Education turning your account over to an outside collection agency.

Student Loan Collections

Paying off student loans can be significantly different than paying off other debts. If you have difficulty paying off loans backed by the Department of Education, you have several options for repayment, including plans based on your income, as well as the ability to defer repayment if you're in school or facing severe financial hardship. However, if you don't take advantage of these options, your loans eventually end up being collected by the Department of Education or one of its collection agencies.

Dischargeablity of Debt

There's no statute of limitations on student loans, and they're extremely hard to discharge in bankruptcy. Although there are loan discharge programs that entitle you to loan cancellation, such as working for 10 years or more in public service while making regular monthly loan payments, you won't be able to eliminate your student loans through bankruptcy or just not paying them. The collectors working for the Department of Education and their outside collection agencies are aware of this fact and aren't likely to cease their collection efforts.

Rehabilitation Rights

If your student loan goes into default, you may have the right to rehabilitate it by making regular, on-time payments for 10 months. Once you do this, your loan is no longer in default status and is serviced like any other student loan. You're eligible for forbearances and deferments, and if you need to borrow more money to further your education, you can do so.

Outside Collection Agencies

If you have defaulted on your student loan debt and haven't participated in the Department of Education's attempts to work out a mutually agreeable payment arrangement, an outside collection agency may take over your account. When this happens, be prepared for aggressive collection attempts, including phone calls at home and at work. It's also possible for the collection agency to garnish your wages or bank accounts, and, because it's working on behalf of the federal government, it won't need a court order to do so.