Washington residents with student loans: beware. Loan monitors throughout the nation are reportedly using unscrupulous tactics in an effort to collect overdue balances on student loans, many of which cannot be discharged during personal bankruptcy proceedings. An investigation into the agency that monitors student loan administration throughout the nation reveals widespread abuse of student loan borrowers, many of whom are suffering from extreme financial hardship.
Student loans are often ineligible for discharge during Chapter 7 bankruptcy for a reason - the system demands that the loans be made easily available to borrowers with poor or no credit histories. Still, this system often victimizes individuals with serious medical problems, including at least one woman who was suffering from pancreatic cancer. That woman says she was subject to creditor harassment from her student loan agencies, who even had the audacity to make claims about her health status. The Educational Credit Management Corporation refused to allow the woman to discharge her $43,000 in student loans, largely because the woman's chance of cancer recurrence was not a sufficient reason for "undue hardship" exemptions.
Further, another case of alleged abuse involved a woman who had paid off her student loans long ago; despite that fact, the agency alleged that she still had a $50,000 overdue balance. Not only did the agency refuse to acknowledge that the woman had paid her debts - supported by ample evidence - but it them began to garnish the woman's Social Security payments. Other instances of creditor harassment from the educational loan agencies are nothing less than appalling. In one case, a woman was chastised for spending $12 on a fast food meal - that expenditure proved that the woman was financially secure enough to pay off her son's student loans, according to the agency. Never mind the fact that the woman's husband was suffering from a terminal disease, and she was his primary caretaker.
Ultimately, educational loan institutions have no right to abuse the bankruptcy system, and bankruptcy judges are discovering that those groups may be committing egregious wrongs against borrowers. Student loan borrowers who are facing overwhelming debt and other financial challenges may benefit from a consultation with a bankruptcy attorney, who can help them learn more about their legal rights and options.
Source: The New York Times, "Loan Monitor Is Accused of Ruthless Tactics on Student Debt" Natalie Kitroeff, Jan. 01, 2014