Katie Brazis
May 2017

Government Suing Borrowers over Student Loan Debt

If you defaulted on your federal student loans and aren’t paying them back despite phone calls from collection agencies and garnishment of your wages, you may be surprised with a new tactic the government is using to collect student loan debt: lawsuits. Recently the government turned to filing lawsuits through private law firms after other collection methods fail.

The new lawsuit programs arrived in nearly 20 federal district courts across the country quietly, with little media attention. After years of communicating to defaulted borrowers through collection agencies, the federal government decided to try something more extreme by hiring private law firms to sue borrowers. With about 4 million borrowers in default on federal student loans, these private law firms may never run out of work.

The government almost always wins these lawsuits. When they win, they put a lien on the borrower’s assets. If the borrower owns a home, for example, their debt is attached to the house. This means that if the borrower tries to do anything with the mortgage, they are expected to clear up the debt first. For those who need to refinance or sell to save money each month, they can’t do so without first clearing the debt. For many, this challenge may seem insurmountable.

The story of Adriene McNally is especially disheartening. After filing for bankruptcy a decade ago, her hopes for a fresh start were diminished by her student loans, which were not cleared. She was working hard toward a healthy financial life when she got served on her birthday. Her frustration was understandable considering she was taking real steps toward financial freedom only to be set back by the lawsuit.

In extreme cases, the government can seize assets like homes, but government officials say it is “exceedingly rare.” Though it has happened before, borrowers should do everything they can to prevent the situation in the first place.

If you or a loved one is about to default or has already defaulted on federal student loans, it’s time to take steps to deal with that. By making a payment now or enrolling in a default rehabilitation program, you can stave off default and avoid the drastic measures the government is using to collect debt.

Options are available to help

Most people do not realize that there are programs designed to help those who may be struggling with their student loan payments. Thousands of borrowers have trusted Ameritech Financial to be their advocate. Click here to find out what options are available. Our services could help you get back on track.

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Katie Brazis

Katie is a Content Coordinator with a BA in English and a Certificate in Editing and Publishing from CSU, Chico, and a Certificate in Copyediting from UC San Diego Extension. In addition to her professional history in editing, she has a deep love of stories. In her free time — when she’s not trying to tame the wild beast she calls her cat — Katie consumes stories in any form. She reads books and watches shows and movies. She plays cooperative games, both video and board, with her husband and friends. When she chooses to venture outside she keeps her phone handy to catch some virtual Pokemon.

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