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The job market is still a very tough place for those who are unemployed or do not have full-time work, and this can put a significant strain on the wallets of millions of consumers nationwide.

Those with outstanding student loan bills, however, might be affected more than others. Prolonged periods of underemployment or even unemployment — which is common among recent graduates — can seriously endanger not only these borrowers’ finances, but also their credit rating, according to a report from the Detroit Free Press. To make matters worse, in many cases, the federal government is now pursuing borrowers who are severely delinquent on their student loan obligations more often than they have in the past.

Throughout 2012, in Michigan alone, the U.S. Department of Justice, working with private law firms, filed suits against more than 240 consumers who were behind on their student loan bills, the report said. Often, regardless of the size of the debts in question, the firms pursued these delinquent borrowers aggressively with phone calls, emails and home visits.

In all, 182 of the people against whom suits were brought owed less than $10,000, and in most of those cases, the amount owed in interest exceeded the outstanding loan principal, the report said. Another 37 people owed between $10,000 and $20,000, while 11 more had outstanding balances of between $20,000 and $30,000. The rest owed more than $30,000.

However, despite the aggressive pursuit of these cases, only 32 of the 220 or so that had been filed through the end of August actually received a response, the report said. This is largely because of the cases either being dismissed or the borrower being able to sufficiently prove a hardship, and therefore receiving a waiver.

The remaining cases, in which a judgment is reached, usually results in the Michigan Department of Treasury garnishing the defendant’s wages by 25 percent and pocketing their income tax refunds, the report said. Through the pursuit of these cases, the federal government collects about 80 cents of every defaulted dollar.

Federal student loans cannot be discharged in most cases, unlike other debts. This means that even some of the nation’s most troubled consumers might still owe them even after going through the entire bankruptcy process.

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  • Flitemedic

    The government should be ashamed of the treatment received by student loan debtors. These loans are sold over and over to private lenders or collection companies who add additional fees and interest for the pleasure of collecting these loans. Here is my story: I signed for an undergrad loan for my daughter back in the 90’s. The original amount was approximately $8,000. At the time I signed for the loan I was fully employed in a career that I loved. In 1995 I suffered a career ending injury on the job. I was hospitalized for 4 months, fractured both legs, my spine, hands, etc. At the time, the student loan was not even in my consciousness. By the time I contacted Sallie Mae, I was told that the loan defaulted and was sold to a private collector. I contacted this company and the told me not to worry, that I could obtain a “forbearance” which stated that I could forego making payments until I was making an income again. I was not told that the amount of interest that would accrue would far exceed the balance of the loan. I was forced to file bankruptcy as not only had I lost everything due to my accident, my identity was stolen in 2006. Student loans are not dischargeable in bankruptcy. So, okay, I set to rehabilitating my credit. I have been successful in doing so except for this student loan. A loan which started as $8,000. is now $17,500. with an interest rate of 9.99%. There are no breaks in the student loan world.

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