How to deal with student loan debt collections in 3 ways

In the last few years, an increasing number of senior citizens and young adults are facing financial problems due to student loans.

Young adults get a long time to pay off their student loans. They have their entire life to repay education loans. But think about the senior citizens. They won’t live long. Plus, they don’t have a regular source of income. The number of senior citizens having a student loan debt has quadrupled between 2005 and 2015. The figure has crossed 3 million. The average debt amount has also increased from $12000 to $24,000. That’s a huge amount, around $72 billion to be precise.

Let’s check out the following facts for getting a clearer picture:
  • Total student loan debt - $1,531,686,100
  • 19% borrowers took out student loans in 2016-17 for covering college expenses
  • Expected default on student loans - $560 billion
According to CNBC and Nerdwallet,

Graduates of the Class of 2018 are heading into a job market with the lowest unemployment in 17 years and higher starting salaries. However, employers plan to hire fewer new grads than in recent years. As a result, nearly four in 10 recent graduates don't think it's likely they'll be able to pay off their student loan debt within 10 years

The condition of the grandparents is worst. Most of them have co-signed on private and federal student loans to help young adults complete higher education. Some of them had taken out student loans years back but have failed to pay off them due to various reasons. The result is disastrous. Their children and grandchildren have completed their education and moved on in their life. But elderly people are left with a huge student loan.

When a loan goes into default, it is usually assigned to a collection agency. Student loan debt collectors have immense powers. If it’s a federal student loan, there is no statute of limitations. This means they can sue you for a student loan anytime.

If the debt collectors break the federal laws, then that’s a different issue. But what will you do if they follow all the rules and regulations? Let’s find out.

How to handle student loan debt collection agencies in 3 scenarios

Here are a few ways to manage student loan debt collectors like a pro in different situations.

1 When you haven’t paid off student loans:

A federal student loan collection agency can be ruthless. They can sue you and garnish your wages anytime. So the best way to deal with them is to take advantage of student loan repayment options. Know the features of student loan repayment options and find out if you qualify for any one of them.

If you have a private student loan, you can use a consolidation loan to pay it off. But even in that case, check out the loan terms and conditions so that you don’t end up paying more in the long run. A consolidation loan won’t help you save money on the total amount owed to creditors.

You could also refinance a student loan at a low interest if you have a co-signer with stellar credit. It can help you save thousands on your loans and pay it off quickly.

2 When you have paid off student loan debt:

In this scenario, student loan debt collection agencies don’t have an edge over you. If a collection agency contacts you regarding a student loan, you should show them the copy of your payment receipts after they have validated the debt.

Fraudulent collection agencies can threaten to sue you, garnish your wages, or levy your bank account. Don’t worry. They can do nothing if you have the papers to prove that the debt was paid off.

3 When you have paid off student loans but don’t have papers:

Recently a bankruptcy attorney told me an interesting case. His client was sued in 2015 for a student loan debt. The loan was taken out in 1980 and was paid off in 1996. The client was confident that he paid off the debt. Unfortunately, he didn’t have any documents to prove that. He lost all the papers years back.

I must say that the attorney is exceptionally good. He used a doctrine called the ‘statute of repose’ to save his client.

According to Wikipedia, “A statute of repose (sometimes called a nonclaim statute), like a statute of limitation, is a statute that cuts off certain legal rights if they are not acted on by a specified deadline.”

“It focuses on immunizing the alleged injuring party from long-term liability, and thus may even be based on elapsed time from an event, even if the potential cause of action cannot reasonably be discovered until a later date”

The attorney advocated that because of the passage of time, his client couldn’t have been expected to retain all the records showing that he repaid the student loan in 1996. The case was dismissed and the client was relieved.

So if you’re in a similar situation, consider taking advantage of the statute of repose.

What else can you do to handle student loan debt collection agencies?

Many things actually.

You can consult an attorney specializing in student loan law and weigh all your options when you’re at the risk of getting sued over a private student loan debt. The attorney can help you take advantage of various variables that come into play like the state law, the judge, and the court. If the collection agency can’t prove you owe the debt, then they can’t enforce it.

You can contact a lender or a financial advisor and discuss all your options. Some lenders may agree to postpone payments till you become financially stable.

Can Chapter 13 bankruptcy help to stop collection calls?

Technically, student loans can’t be discharged in bankruptcy in the normal scenario. Plus, it can be tough and expensive to discharge student loan debts in bankruptcy. However, a Chapter 13 bankruptcy offers a few benefits when it comes to dealing with student loan debt collection agencies.

1 Benefit - Chapter 13 stops collection calls

When you file bankruptcy, the automatic stay goes into effect immediately. It stops all creditors and collection agencies from collecting debts. They can’t call you or send any letter for collecting debts. They can’t garnish your wages or seize your assets. They can’t file lawsuits or send you bills. All proceedings stop till the completion of bankruptcy proceedings.

2 Benefit - Chapter 13 gives you time to repay debts

Chapter 13 bankruptcy doesn’t give you a permanent solution when it comes to student loan debt repayments. It won’t discharge your student loans. But it will give you time to repay your loans.

You have to make monthly payments for 3 years to 5 years in a Chapter 13 bankruptcy. You have to send payments to a trustee, and he distributes them to your creditors. The amount depends completely on the court-approved repayment plan. Collectors can’t make collection attempts during this period. So you get time to pay off your student loans comfortably.

3 Benefit - Chapter 13 gives you a huge stress-relief

Chapter 13 puts an end to immediate problems like wage garnishments, collection calls, letters, and attachments. This reduces stress, both emotional and financial. It helps you make plans to move forward and improve your financial life. It helps you live a life free from the collectors. That’s something serious to consider.


Don’t surrender when your student loan goes to collections. There are ways to get relief. Ask the collection agency to validate the debt first. Last year, several borrowers erased student loans after the debt collectors failed to prove in the court that they owned the debt. They failed to validate the debt due to a glitch in their paperwork trial. The court dismissed the case and the borrowers gave a sigh of relief.

The National Collegiate Student Loan Trusts sued borrowers when they failed to pay $5 billion worth of debt. Instead of getting scared, the borrowers showed up in the court. Fortunately, the National Collegiate couldn't validate the debt and the judges dismissed the case.

The bottom line is, never lose hope.

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