The collection of student loan debts has had an upward trajectory due to many defaulters in the United States. As of 2019, there were 45 million borrowers with over $1.5 trillion student loan debt. The loans come from the federal government and some from private lenders.
Fortunately, the Fair Debt Collection Practices Act has set rules that control the actions of debt collectors. It safeguards consumers against unfair debt collection practices, abusive behavior, false representation, and more. There are many reports about harassment from guarantors; thus, you need to know your rights, as discussed below.
Right to Fair Debt Collection Practices
The FDCPA usually governs students’ loans since they are consumer debts. As a result, debt collectors can’t harass, mislead, or engage in abusive and unfair tactics. For instance, when a private lender wants to collect their loan, they can’t threaten to file a lawsuit unless they do it. Additionally, they can’t lie about the applicable enactment of limitation to your loan or decide to collect illegitimate amounts.
If your loan is federally subsidized, the government uses private companies to collect from defaulters. Government loans have several repayment options. Therefore, it’s a violation of the law for a debt collector to misrepresent or mislead you about those alternatives. It’s also a violation of the law to contact your family members or your employer about the loan.
Students loan debt collectors are also restricted from the following:
- Calling you over and over in quick successions
- Continued collection efforts when automatic bankruptcy applies to you
- Contacting you during inconvenient times
- Calling you when they are aware that an attorney represents you
- Intimidating you about harming your reputation
- Demanding payment if you are an active US military member
Loan Collection Options
Note that the collection option depends on the type of student loan you have. You can ask your lender or the debt collector who contacts you if you are unsure. Alternatively, you can use the National Student Loan Database to search for your loan. If it’s in the database, it’s federally subsidized.
When collecting federal loans, the Department of Education can do the task without a lawsuit. If the loan goes on default, a 16% collection fee can be accrued. The collection procedures can involve many steps, but there are limitations to the amount of money they can recover. For instance, wage garnishment can only get to a maximum of 15%, while social security goes up to $9,000 per year.
On the other hand, private loan collection processes involve similar procedures like other consumer debts. As a result, the creditor cannot get their funds forcibly via wage or bank garnishment unless there is a judgment. The collection process could involve calls or letters from the guarantor, third party collector, law firm, and more.
Fighting Back Illegal Collection Strategies
About 20,600 debt collector complaints were reported for the year ending on August 31, 2019, as per the Consumer Financial Protection Bureau. Of these, the majority involved federal student loans at 13,900 while the rest were private loan complaints. The state agencies are put in place to protect the system’s integrity whenever the term of consumer debt might be unclear.
You can sue student loan collectors if they violate your rights. Consequently, you may recover legal fees and money damages. If you don’t fully understand the law, you can consult with an attorney so that every debt collection process follows the set laws.
Owing money to a private lender or the federal government is stressful, but it doesn’t warrant debt collectors to bully or harass you. The FDCPA prohibits acts such as deception, misleading representation during debt collection about the legal status, amount, or character of the debt.