When a Houston man was arrested by the United States Vice Marshals earlier this month, the headlines were swift and furious. Paul Aker has claimed that he was arrested for non-payment of a $ 1,500 student loan dating back to 1987. This took us back, many say, to the days of debtor jail.
Only that’s not the whole story. Yes, Aker owed a student loan. But the arrest was not due to non-payment of the loan, but to failure to comply with a court order.
According to court documents, Aker borrowed $ 1,500 from
Aker was sued for the remainder of the loan (United States v. Winford P. Aker). After failing to respond to a complaint served on him, a default judgment was handed down in favor of the government in 2007. Aker has still not paid. Five years later, in a collection effort, the government asked Aker to either explain why he had not complied with an order to pay the remainder or to provide his financial documents as requested. The court ultimately ordered Aker to appear in a deposition to do just that, noting specifically in an October 31, 2012 order, that “If Winford Aker does not appear, the court will have him arrested.”
The arrest warrant was served on Aker in 2016, but it was not without incident. Authorities said Aker said he would not cooperate and said he had a gun. The two US Marshals serving the arrest warrant called for reinforcements and ultimately Aker was arrested.
Aker’s total student loan debt has grown significantly since his first default. In addition to the student loan bill which has soared to $ 3,800 with interest, Aker must repay the US Marshal the sum of $ 1,258.60 for his arrest, bringing the total owed to more than $ 5,000.
While the story isn’t as sensational as we’ve been led to believe (bottom line: you don’t go to jail just for not paying off your loans), there are lessons to be learned. Top of the list? Pay off your student loans. They won’t leave. There is no statute of limitations for federal loans, which means the federal government can try to collect indefinitely.
So what if you can’t pay? Here are some possibilities:
- Your salary can be entered. When it comes to debt – whether it’s tax debt or student loans – federal authorities have a potentially powerful reach. This includes the ability to seize your salary (usually up to 15% of your take-home pay) to settle your debt.
- You can be sued. This is more likely to happen when it comes to private loans, but you can be sued for the outstanding debt balance. When this happens, not only are you owed debt, but also potentially attorney fees and other costs.
- Your mother can be sued. Okay, it really depends on whether your mom co-signed the loan. Anyone who co-signs a loan for you is usually on the same terms as you – if you don’t pay, the lender will try to get money from the next one in line. It could be your mother. Or your father. Or your great aunt. Don’t let them clean up after your mess.
- Your federal tax refund may be entered. This is often referred to as “clearing” since foreclosures are part of the Treasury Compensation Program (TOP); the program is administered by the Financial Management Service, a branch of the US Department of the Treasury. Here’s how a lag is supposed to happen:
- If you owe a government agency money, such as student loans, the agency is supposed to give you notice and allow you to settle or dispute your debt. If you cannot come to a resolution, the agency can send your debt information to TOP. This can happen as soon as the debt is over 90 days past due.
- If you still don’t pay, your name and the amount owed are entered into a TOP database.
- If you are eligible to receive a payment from the federal government (such as a tax refund check), TOP searches the database.
- If your name appears, your payment is offset by all or part of the amount you owe according to a formula in order to pay off your debt. Typically, up to 100% of your federal income tax refund can be withheld to meet federal non-tax debt (including student loans), child support, income tax. state and unemployment insurance debts.
- The rest, if any, is then sent to you.
(To learn more about compensation, including those involving social security, click here.)
So what do you do when you feel like you can’t pay off your student loan debt? Jay S. Fleischman, Esq., A consumer protection attorney working with student loan borrowers at Shaev & Fleischman, LLP, offers the following tips:
- Get organized. The first step to avoiding being overwhelmed is figuring out how much you owe and to which lenders. For federal student loans, you can search the National Student Loan Data System, which is the US Department of Education (ED) central database for student aid. You can use your Federal Student Aid username and password to access the system; if you do not have a username and password or if you have forgotten your login details, creating or resetting your access is simple.
There is no centralized database for private student loans, so you will need to get a copy of your credit report and review the information. Your school may also be able to provide you with a list of lenders who have helped fund your education, so call the financial aid office if you need additional help.
- Review your income and expenses. Most people don’t have a clear idea of how much money they get each month or what they spend. In order to determine your ability to pay off your student loans, you need to have an idea of how much is available in your budget – and where you might be able to reduce some of your monthly expenses.
- Review federal reimbursement options. The US Department of Education offers a number of repayment options for federal student loans. There are 4 separate income based options that will set your monthly payments at an affordable level and lead to discharge of your unpaid loan after a certain number of years. Although there may be tax consequences, these plans can make it easier for you to make your payments on a timely basis.
There is no cost to enroll in any of the income-based reimbursement options, and you can determine applicable payment amounts using the US Department of Education’s reimbursement estimator. . If you log in with your FSA username and password, the system will use your current loans to provide you with an accurate repayment figure.
- Contact your private lenders. Private student loans don’t come with the repayment options available to federal borrowers, but that doesn’t mean you’re out of luck. Contact your lender to see if they offer reduced payment options and forbearance.
- Resolve the fault early. Federal student loans come with a number of default resolution options. You may be able to consolidate your federal loans free of default at no cost through the United States Department of Education’s Direct Consolidation Loan Program. Other options include pardon, which allows borrowers to make reasonable and affordable payments to the debt collector for a period of time, after which the loan is removed from default and discounted.
While private student lenders are not required to offer rehab programs, you should contact your bank to see if there are any options available to help you get out of default. Even if your lending institution does not allow you to rehabilitate your overdue loans, you should speak with the debt collector and seek a voluntary repayment agreement or settlement.
- Stay responsive. Student loan borrowers who are behind on their payments often stop opening mail and answering phones due to the stress associated with debt. This ends up causing people to miss crucial advice on pending lawsuits, administrative wage garnishments, tax settlements and judgments.
Keeping lines of communication open allows you to respond in a timely manner and avoid legal and administrative enforcement actions. You will also know when your lenders are able to offer repayment and settlement options.
Finally, Fleischman says, “It’s in your best interests to be proactive about student debt so that you can work to resolve issues quickly and effectively.” And remember, “Ignoring the problem won’t make it go away. “