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The First Thing to Do If a Debt Collector Sues You for Student Loan Debt

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With student loan balances continuing to climb, student loan default has increasingly become a problem for consumers, and in addition to the problems default causes on its own, it brings along another unpleasant experience: debt collection.

The rise in student loan debt has resulted in more lawsuits against borrowers for failing to pay, often leading to judgments against the borrowers. Judgments typically lead to wage garnishment and credit damage (in addition to what’s already been suffered by not repaying the loans), making it even more difficult for the borrowers to regain the financial stability necessary to catch up with debts that are practically impossible to get rid of.

This issue becomes more problematic when you factor in the possibility that these lawsuits come from entities without the right to collect these debts in the first place. In a recent article, Bloomberg described a system in which debt ownership is repeatedly transferred and lawsuits come about from entities that may not have the right to sue borrowers. Still, if borrowers don’t question the lawsuits and fail to show up in court, judges rule in favor of the creditor and issue default judgments against the borrowers.

Whenever you’re dealing with a debt collector, and especially if you’re being sued over a debt, the first thing you should do is request verification of that debt in writing. It’s one of your consumer rights in regard to debt collection, but it’s something many people overlook, either because they assume it’s legitimate and can’t do anything about it or they don’t know otherwise. The collector should be able to provide you details on the debt and how it got to the point of needing to be pursued legally.

Checking your credit also needs to be at the top of your to-do list when dealing with debt collectors. It’s important you know how the debt is being reported and that is done so accurately, because collection accounts and judgments have a seriously negative impact on your credit scores. You’re entitled to a free annual credit report from each of the three major credit reporting agencies through AnnualCreditReport.com, and you can get two of your credit scores for free on Credit.com, updated every 30 days.

If ever you have questions about how to deal with a debt collector or if you legitimately owe the debt, seek the help of a consumer attorney — you should be able to find someone to review your case for free.

More on Student Loans:

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  • sergei chang

    This is sad.

    1. Fix public education so it works again (and not by punting to for profit charter schools which will skim a significant amount of education off the top to pay investors and executives.) It worked once upon a time and it can again.

    2. Beef up scholarship amounts for those who have demonstrated promise so they can cover living costs as well as tuition. Educate them on how to live cheaply (netflix instead of cable… $25/month auto insurance from Insurance Panda…. tMobile for cell phone… etc.)

    3. Raise the amounts of Pell grants.

    4. Make sure that loans for college are low cost and non-predatory.

    5. Recognize that some people are better suited to trade schools (which can lead to high paying jobs, too) rather than college. We need plumbers, electricians, HVAC mechanics, etc to build and operate the systems designed by the college educated architects and engineers.

    6. Above all, do NOT raise the graduation rate by watering down requirements. This is part of how we got into the mess we have with our high schools.

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