Collection of Student Loans: A Critical Examination
20 Wash. & Lee J. Civil Rts. & Soc. Just. 215 (2014)
83 Pages Posted: 6 Apr 2014 Last revised: 14 Oct 2014
Date Written: October 13, 2014
Although the collection of college student loans centers this article, some background precedes its main topic. It begins by defining and distinguishing federal and private student loans. Next is repayment of loans, postponing repayment through deferment, forbearance, extensions, and public-interest assistance and cancellation. Perkins loan deferment, forbearance, and cancellation follow. Delinquency and default are next, including collection fees and penalties, administrative wage garnishment, state and federal income-tax-refund offsets, federal benefits offsets, and professional-license suspension. The lender’s judicial collection is followed by the borrower’s limited affirmative defenses and post-judgment tools. A borrower may exit default through consolidation and rehabilitation. There are two types of statutory discharges: school-related discharges and discharges for death and disability. The article turns to discharge of student loans in federal bankruptcy; the scope of the discharge exception leads to the rigorous statutory test, “undue hardship.” The article also compares collection techniques and policy justifications for delinquent family support with collection of student loans.
Like a maze, educational debt is easy to enter but difficult to exit. The important policy that a debtor should pay her just debts isn’t an absolute. Life happens. Considering the formidable pre- and post-judgment collection techniques and the absence of defenses like of the statute of limitations, the student-loan borrower’s only sure exit is the final exit of death. The article concludes by recommending that the delinquent student-loan borrower’s plight be ameliorated. Treatment of student-loan debt like other debt, for example like credit-card debt, is a consummation sincerely to be wished.
Keywords: college and university, student loans, Perkins loans, debt collection, bankruptcy, consumer credit, credit-card debt, and family support
JEL Classification: K10, K20
Suggested Citation: Suggested Citation