December 15, 2020

Defaulting on Student Loans Drastically Affects Arizona Students

Nearly 43 million Americans live with outstanding student loan debt. Loan borrowers who miss or delay paying their bills for 270 consecutive days go into what’s called “default” status. What many students in Arizona are unaware of is that defaulted federal student loans often end up in the hands of private debt collection agencies. This happens because the Department of Education contracts third-party servicers to accrue payments, but when borrowers default their loans, the servicers send the loan balance back to the Department of Education, which then redirects the balance to private companies.

The consequences of defaulting on your student loans are far-reaching. From excessive collection fees and wage garnishment to the amount of money you receive on your Social Security check and federal tax refund, failing to pay your student loans can gravely impact your lifestyle. Find out more about the long-term effects of defaulting and your options for exiting default in Arizona.

Detrimental Outcomes of Defaulting Student Loans in Arizona

Not repaying your student loan debt can profoundly impact your ability to make a good living and sustain an adequate lifestyle. While loans are a big help in paying for school, they can turn into a big responsibility in the years that follow. Some of the detrimental outcomes of defaulting student loans in Arizona include:

  • Loss of access to loan repayment services
  • Collection charges that add to debt
  • A bad credit report that lasts for up to seven years
  • Risks to your licenses and career

Avoiding default is your best option for not jeopardizing your future endeavors. If you think you may have a problem paying your student loan balance, immediately contact a trusted debt settlement advisor to help you settle your debt for less than you owe.

Four Paths for Exiting Default

Leaving a loan in default is not the only thing that presents barriers to borrowers in Arizona. Exiting default can be just as challenging. Generally, four paths exist for exiting student loan default. These include:

  • Consolidation: A process that allows you to combine multiple loans into one new loan with a single monthly payment rather than several payments.
  • Repayment: Borrowers willingly pay off the full amount or a portion of their loan balance.
  • Discharge: In certain situations, such as death, illness, or school shutdown, the government may cancel your loan and release all responsibility for repaying it.
  • Rehabilitation: A process that removes your loan from the default phase and into a structured repayment plan that offers a more manageable monthly payment.

How the Department of Education Should Help Borrowers in Arizona

Higher education helps many families flourish at greater levels of economic stability. However, high piles of student loan debt significantly hinder that benefit. The Department of Education should take necessary measures to help current and future borrowers in Arizona make more conscious decisions regarding student loans and reconfigure the student loan repayment system to help students refrain from defaulting on their student loans.

Efforts to help borrowers should start with recognizing vulnerable borrowers—those who may have a more considerable risk of missing payments. Another effective way to improve repayment is to equip borrowers with loan servicers who will spark regular conversations about loan repayment and resources for help.

Contact an Arizona Student Loan Lawyer to Reduce Your Debt

Student loan debt can be an insurmountable burden. For many Arizona students, completing payments earlier versus later is a worthy goal. Unfortunately, paying off student loans has been harder to achieve than was once thought. Students graduating and entering the workforce have been limited amid a pandemic and job layoffs. Consequently, students are overwhelmed with the weight of student loan debt.

At McCarthy Law, our experienced attorneys are committed to helping Arizona students reduce the principal balance on their private student loans. By implementing our student loan debt settlement program, our licensed legal team will effectively negotiate with lenders to make sure our clients pay a reduced amount of their current loan debt. To request a consultation with McCarthy Law and learn more about your options, call (855) 976-5777 or fill out a contact form today.

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