Garnishment may result for those defaulting on student loans

Reports about the delinquency and default rates of student loans reveal that student loan borrowers are facing serious financial distress. As financial problems become graver, borrowers get closer to the possibilities of garnishment and losing significant benefits. In light of these staggering statistics and realities, it is important for student loan borrowers in Mississippi to seek sound financial and legal advice.

The Chronicle of Higher Education has reported a rise in the delinquency, forbearance and deferment rates of student loans. In the Higher Education Opportunity Act, Congress outlines the specific method to evaluate student loan borrowers' financial challenges. The Act sets forth a three-year rate in order to get a better picture of how borrowers come to default on their loans.

This three-year rate to evaluate borrowers' financial situations has uncovered some staggering information about the rate of defaults. For example, those borrowers whose repayment began on October 1, 2008 have a default rate of 13.4 percent. This is an increase from previous years and marks a bad sign for borrowers.

With default comes serious repercussions like wage garnishment, the seizure of tax refunds as well as Social Security payments, the revocation of professional licenses and even lawsuits.

To avoid such penalties, student loan borrowers in Mississippi and elsewhere should understand the legal effects of their actions during times of financial challenges. In particular, it is worth noting the difference between delinquency and default. The law defines delinquency as the first instance that a borrower misses a payment. If a borrower remains delinquent for nine months, his or her situation then becomes one of default. In default, a borrower may be subject to collection.

To avoid such legal consequences and the stigma that comes with them, borrowers should be proactive about their loans. It is prudent to seek out financial and legal advice to stay on top of their financial situations.

Source: U.S. News & World Report, "Examine the Scope of Student Loan Borrower Distress," Isaac Bowers, Dec. 5, 2012.

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