FAQ?

2. How will this process benefit me?

Getting out of a default status on your student loans will help you in many important ways! You will not have to worry about creditors calling you at home and work. You will no longer have to worry about wage garnishment or tax refund garnishment. You will be able to make major purchases again, like a new car or a home. You won’t have to worry about a prospective employer seeing your default status on your credit report. Your interest rate on your student loans will drop dramatically. You will be able to go back to college to further your degree and be eligible for financial aid including grants and scholarships. You can once again utilize your deferment and forbearance options on your loans. Call us today so we can help you get your life back on track!

3. How can I stop wage garnishment?

You can only stop wage garnishment by agreeing to pay your guarantee agency under the terms of a rehabilitation program or by restructuring the loans into a new loan. We can help you with both of these options.

4. In the Future, how can I avoid default?

If you are under 270 days delinquent, there are generally three things to do to avoid defaulting on a student loan when you are unable to pay. They are:

1. Pay the student loan off through a credit card or other type of loan,
2. renew or consolidate the loan into a new loan, or
3. utilize any deferment or forbearance options.

5. Can default affect my professional license?

Yes, the Department of Education can suspend a professional license while Federally Guaranteed Student Loans are in default.

6. When can my student loans be cancelled or discharged?

All loans received under programs authorized by Title IV, of the Higher Education Act can be canceled for several different circumstances including: (1) in the event of your death; or (2) if you become totally and permanently disabled after the loan is disbursed.
In addition, some loan types may qualify for loan discharge under a variety of conditions. Some of the most common cancellation provisions are listed for you below:

• the school you attended improperly certified your ability to benefit from the training given.
• the school you attended closed while you were in attendance or within 90 days after you withdrew from the school.
• A National Defense Student Loan can be canceled in 2 additional circumstances: (1) full-time teaching and (2) military service.
• Finally, your obligation to repay your loan may be discharged in bankruptcy.

7. Can I cancel my loans in bankruptcy?

In most cases the answer is no.

Under certain circumstances you can discharge your obligation to repay a student loan in bankruptcy. The criteria are set out at 11 U.S.C. 523 (a) (8). Currently your loan may be discharged only if the first payment became due on the debt at least seven years before the bankruptcy was filed.

Any grace periods, forbearances, or deferments must be subtracted from the time elapsed between when the first payment became due and the filing date. Loans outstanding for less than the required seven-year period can be discharged only if the bankruptcy court makes an express finding that repayment would place an "undue hardship" on you.

If your obligation to repay a student loan is discharged in bankruptcy, any co-signers or endorsers of your debt are not discharged. For example, if your parents co-signed your student loan, they are still liable for repayment.

8. How can I obtain a forbearance on my loan?

The Department encourages lenders to grant forbearance if you are in poor health or other personal problems affect your ability to make scheduled payments. Forbearance is not as helpful as a deferment because interest continues to build while the loan payments are reduced or postponed. The size of the outstanding debt could actually increase during a forbearance period. However, forbearance is not available when the loan is in default. Seeking forbearance would allow you to avoid default during the time in which you cannot afford to make payments.

Lenders must grant forbearance when your debt exceeds 20% of your gross income and you submit a written request. Under those circumstances a lender must grant forbearance for one year and shall renew it for a second and third year under certain conditions. Moreover, the fact that you are granted a forbearance cannot be the cause of a negative credit report and no fees can be charged. Unfortunately this right is limited to loans held by lenders. It does not apply if the loan has been taken over by guaranty agency or the Department.

9. Are there any disadvantages to the rehabilitation program?

There are many disadvantages to rehabilitation. 90% of people that begin rehabilitation programs don’t finish them. As soon as one payment gets returned late, the contract is null and void and you have to start over from the beginning (only after the 6-12 month period has expired). Also, you’re still being reported in default on your credit report for a 6-12 month period even though you are making on time monthly payments, which DOES continue to damage your credit. 25% of your payment still goes directly to the collection agency and the remaining 75% goes to collection fees and collection interest. You are also still accruing collection fees and collection interest while on a rehabilitation plan!

10. How do collection agencies get paid?

The Dept. of Education allows the collection agencies to charge additional interest and fees to the principal balance of the borrower. These fees are generally 25-35% of the borrowers principal balance.

11. What is Tax Offset?

Tax Offset is a term used to describe your tax refund being taken by the Dept. of Education and used to offset your student balance.

12. How long does it take to get a garnishment lifted?

Each situation is different because of the number of factors involved. Generally, it will take 45-90 days to have a garnishment lifted and restructure the loans.

13. How can I find out what Federal loans I have?

www.nslds.ed.gov

14. Is there a statute of limitations?

By virtue of Section 484A of the Higher Education Act, a statute of limitations of no kind currently limits Department of Ed’s or the guaranty agency’s ability to file suit, enforce judgements, initiate offsets, or other actions to collect a defaulted student loan. Regardless of the age of the debt, statutes of limitation are no longer valid defenses against repayment of a student loan.

15. Can DMS always get someone out of default?

Yes. We do our best to help everyone, but each person’s situation is different and therefore each solution is different. We will either provide a restructure of your loans or we will negotiate a rehabilitation.