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Lev, Tax Preparer
Category: Finance
Satisfied Customers: 29656
Experience:  Personal Investment, Tax Preparation
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I am in default of a student loan of over 20 years ago .

Customer Question

I am in default of a student loan of over 20 years ago . recent the dept of Ed have started granishing my pay at 15%. I email the dept of Ed they tell me it in the hands of Van Ru I email Van Ru but they will not reply. I willing to make payment but need to stop the granishing. I work at walmart and at best will make about $15000 this years last year I didn''t make over $9000 I was reading about Requesting a hearing but not sure if this is the best way to go.I need a fast way to take care of this the load was about $2500 when I borrow the money now it was over $6000 they been taking my income tax for years ..I do not have any saving and no money to pay it off Thank you
Submitted: 9 years ago.
Category: Finance
Expert:  Lev replied 9 years ago.

The debt resulted by the student loan is treated differently from other debts - it is almost never discharged in bankruptcy procedure and as in your situation it may be offset by tax return or some other payments. In additional, student loans do not have a statute of limitations.

Generally - as your wage garnishment started - you are not able to stop it unless the debt is paid off. Since your student loan got into "default" status the full balance of the loan is due immediately and other options for delaying payment can no longer be used.

Some states have the law that prohibited wage garnishments or at least limit garnishment by only high paid persons. But that will not eliminate your debt.

As your loan had an interest - the debt will increase as long as you have an outstanding balance - so there is nothing surprising your debt is more than doubled over years even you paid some amounts.

The common way to reduce the interest is to refinance the student loan. You may get low introductory rate and use that time to reduce the principal.

Please be aware that there are some programs that allow to discharge the student loan debt - While not many could be eligible - it is possible to have your student loan debt discharged (canceled) or reduced, but only under certain specific circumstances.

Customer: replied 9 years ago.
Reply to Lev's Post: Thank you for your help How do you refinance this student loan. Is there a dept of Ed program for this?
Expert:  Lev replied 9 years ago.

Government agencies will not provide refinancing for you - you need to contact commercial lenders and compare rates from different lenders. Please be aware that each lender has different qualification requirements for refinancing - so be sure to verify if you qualify.

Student loan rates vary by lender and by your credit history - before filing application - get your credit report and take care to fix problems if possible. Rates for refinancing federal student loans change once a year - normally on July 1. As currently the rates are very low - it is a good time for refinancing.

If lower rates are not an option - you may look for extending the duration of your loan - that might reduce the financial pressure .