<p>I have a coworker that received a couple of collection calls at work by mistake. They wouldn’t tell her who they were looking for but she called her 30 yr old son and found he is in default of his student loans. She is not a consigner so she thinks they may have gotten her work number from school records. She has a different home number now but has been at the same work phone for almost 30 yrs. </p>
<p>Her son has a severely disabled son and is the sole wage earner in his household so lots of stress on top of worsening financial situation. </p>
<p>We were curious. Can they foreclose on a house for student loan debt? Garnish wages? How does one address a problem this massive?</p>
<p>A student loan is an unsecured debt. There are some collections methods allowed because it is a Federal debt without further legal action, like garnishment of tax refunds, other government payments (SSI, SS, some military payments). Most unsecured debt has to be reduced to a judgment before any collections can happen but student loan lenders have ‘super powers’ and they can do a lot before reducing a default to a judgment.</p>
<p>The collector can file a state action and reduce the debt to a judgment, then execute on the judgment. The state laws will control what is allowed for a collection judgment, including attaching to real estate and thus foreclosure (many state restrict the minimum amount a judgment must be before the creditor can start the foreclosure) or garnishing wages or bank accounts. However, the creditor is unlikely to reduce it to a judgment because judgments CAN be discharged in bankruptcy. It’s also unlikely a judgment creditor will bring the foreclosure action because the first mortgage holder (and maybe second, third) are in front of the judgment, so the superior creditors will be paid first. Most judgment creditor just wait until the home is sold and then they get paid if there is equity.</p>
<p>While those in default might be sure the loan won’t be reduced to a judgment, there are other penalties. With a default on the record, the borrower might not be eligible for any federal jobs, or jobs with contractors who have a government contract.</p>
<p>OP, your son should try to make arrangements for a lower payment plan or to otherwise clear the default.</p>
<p>I will tell you that while student loans are virtually never dischargeable… my ex successfully represented someone who was disabled (although it sounded like mostly stoned) in getting his SL’s discharged. So…</p>
<p>My suggestion is that you strongly encourage your coworker to have her son contact his servicer(s). If he is not sure who to contact, he can see his loan info at <a href=“http://www.nslds.ed.gov”>www.nslds.ed.gov</a> (he may need to get a PIN to sign in … <a href=“http://www.pin.ed.gov”>www.pin.ed.gov</a>). He should contact the servicer(s) and ask to speak with the default prevention unit. As I tell my students, the single worst thing to do is stick your head in the sand & ignore the fact that the loans are overdue. This will not go away, and it can only get worse with time. He should explain his situation and ask about his options. Please, please try to get the coworker to help her son to understand that this is something he really must do.</p>
<p>Thank you all. I will pass the info on. </p>