I took out a federally funded student loan in 1984 for $2,000.00. I never paid it back and it is now at $4,300.00. I would like to make arrangements to pay it back but need to know the best approach. I know when I call they will try to intimaidate me and I want to know what they can and can't do. I have been told that since it was federally funded they can still get a judgement against me. Is that true? (I live in California) Also can they garnish my wages if I only make minimum wage and am my daughter's sole support. Realistically how much would a judge give of my paycheck. Any advice would be very much appreciated. Thanks, Tamara
Which agency is it through? If you do a search for ombudsman or federal student loans on the site, you may find some information. Kate
They don't even have to go to court and get a judgment in order to collect. They will do an "administrative wage garnishment" The amount they can garnish depends on your state. They use a formula to figure out the amount you will pay. I'm not sure if they could get much if all you have is minimum wage. In most states they can garnish 10% of you salary maximum, but if you owe back child support it could go as high as 25% Work with the agency and request your loan to be "rehabilitated" They will give you a payment plan that takes into acoount all your expenses, income, etc. It is an income-sensitive plan. If you make 12 on-time monthly payments under the plan, they will remove your loan from default status, and then you can apply for other programs designed to reduce your loan payments to an amount you can afford each month. (I'm not sure..I think one of these programs is called the "FORD" loan see here: www.ed.gov/DirectLoan
You can contact Direct Loan Services i.e. William D. Ford loan to consolidate and take out a loan. Maximum percentage is 8.25 with 1/4 shaved off when you do direct payment through your checking account. I got mine at 4.25% for a $41,000 student loan. YIKES!
You have 2 options: Immediate payback - in which the tradeline remains and you do not need to fear tax or wage garnishment or Rehabilitation - in which you make 12 on-time payments to the CA. When you are done the tradeline is removed and your taxes/wages go back to you Do the rehab if you are planning a major purchase in the next 7 years. Do the payback if you want your immediate gratification - your tax return. Payback did look good for me at the time, but I opted for rehab and am glad because I am going to purchase a home.
It's not always true that tax refunds are bad investments. While it is true that you are "lending" you money to the government tax free, it depends what you do with it if it's a bad move or not. If you have the discipline to invest the few extra dollars you get each payday, then coming out even at the end of year is indeed a better option, as you will have saved the money during the year. If, however, you're like the vast majority of people in this country, you'll take those few extra dollars each payday and go to dinner or the movies. Now, at the end of the year, you have no savings and no tax refund. If you're going to spend the money during the year but will use the refund to invest or do a major project, then I'd rather see a person do that. Of course, the ideal is the first scenario that I gave. You decrease your withholding but put that money away EVERY SINGLE PAYDAY. Then I agree that a refund is a bad "investment." Otherwise, not necessarily.
