U.S. student loan debt has hit an all-time high of $1 trillion dollars recently, and the federal interest rate has just doubled. With student loan debt outpacing credit card debt as the primary source of personal debt in America, what is being done to mitigate the level of debt? If you are struggling with debt, a bankruptcy attorney may be able to help.
Student Loan Debt Can Lead To Wage Garnishment
The bad news is that student loan debt is not dischargeable in bankruptcy, except in highly specialized circumstances. This means that your loan debt is not going away, but it can still be managed. Since it cannot be discharged in bankruptcy, the federal government can set up liens against your income tax refund, or even hire a private bankruptcy attorney on a contingency contract to pursue the delinquent account, resulting in wage garnishment and the seizure of assets.
Wage garnishment means that the government has the power to seize part of each paycheck as payment for your defaulted loan; this can play havoc with your finances, making you unable to pay other expenses such as rent or credit card bills, which will in turn head to collections. Since student loans cannot be discharged in bankruptcy, it may be wise to pay these loans first, even to the point of letting other debt languish.
The good news is that the government is looking for ways to lower the interest rate, which went up July 1st from 3.4% to 6.8%. There are a number of plans being hashed out in Congress to lower the rate again. So while wage garnishment remains a haunting specter, solutions are hopefully in the works for those with mounting student debt. A bankruptcy attorney can provide advice if you are sinking into debt.