Debt Collection and Consumer Issues

Debt Collection

Debt collectors can be aggressive and hostile. Some tactics that debt collectors use include: frequently calling the debtor’s home, workplace, and/or family members, use offensive or demeaning language, and invoking fear by threatening to take legal action or garnish income.

Many seniors in Maryland may have some protection against debt collectors. It may be possible to negotiate settlements that help seniors to make an affordable repayment plan. If legal action is taken against a senior to collect a debt, under some circumstances, it is possible to protect certain forms of income, such as Social Security or retirement income, from garnishment.

Federal Student Loans vs. Private Student Loans

How can I tell if my student loan is federal or private? Federal student loans are made with the U.S. Department of Education – all other loans are private student loans. Although federal student loans are made through the U.S. Department of Education, the lender uses loan servicers to manage student loans. As of January 2020, the current list of federal student loan servicers are CornerStone, ECSI, FedLoan Sevicing (PHEAA), Granite State – GSMR, Great Lakes Educational Loan Services, Inc., HESC/Edfinancial, MOHELA, Navient, Nelnet, and OSLA Servicing. (See https://studentaid.gov/manage-loans/repayment/servicers). Contact your provider to ensure that your loan is financed with the U.S. Department of Education.

Co-Signing for Student Loans

Many student loans require that the student apply for the loan with a “co-signer.” It is important to know that being a “co-signer” for a student loan is different than providing a “reference” for someone to get a student loan. In general, if you must add your signature to a student loan document or give personal details such as your Social Security Number, you are not just providing a reference, but co-signing. When you co-sign for a student loan, you are held responsible for repaying the loan along with the borrower.

Default on Student Loans

Defaulting on student loans can be costly, especially for older adults on fixed incomes. For federal student loans, if the borrower cannot afford the monthly payment, income-based repayment plans are available to lessen the financial burden. This is often not the case for private student loans. When the borrower defaults on federal student loans there are limited options to get the borrower back in good standing. The borrower should work with the federal student loan servicer to explore ways to get back in good standing.

As a co-signer, the primary borrower defaults, the lender may seek to hold you responsible for the student loan. Unfortunately, income driven repayment plans are not available for co-signers on federal student loans. This means that the borrower’s income is used to determine the monthly payment which may be much higher than the cosigner who may be on a fixed income.

When default occurs, whether you are the borrower or the co-signer, the lender may take legal action against you, add adverse remarks on your credit report, and even garnish your source(s) of income. Although some sources of income are exempt from garnishment for private student loan default, there are generally no exemptions for federal student loan default.

Extinguishing Student Loan Obligations

In general, student loan debt cannot be discharged in Bankruptcy and there is no statute of limitations for student loan lenders to pursue legal action for default. Borrowers with Federal Direct, FFEL,  Perkins, and TEACH Loans who are totally and permanently disabled may qualify to have their student loans discharged.

Other Common Consumer Issues

  • Contract Disputes
  • Deceptive/Fraudulent Sales Practices
  • Product Warranties
  • Credit Reporting Errors
  • Utilities (High Bills, Service Disruption, Obtaining Service, etc.)

And More