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Many drowning in student loans need debt relief

Many people in Massachusetts who go to college do so in hopes of obtaining a lucrative job after graduation. Unfortunately, due to the economy and other outside forces, many people are no longer able to make their student loan payments and soon find themselves being harassed by debt collectors. However, the U.S. Treasury Department is trying to take some steps that will help student loan debtors in these situations.

A pilot project by the U.S. Treasury Department that may start early in 2015 will transfer some student loan accounts out of the hands of private debt collectors and into the hands of the federal government. The hope is to side-step private debt collectors, some of whom have amassed a fortune by preying on student borrowers. Federal employees would be in charge of helping student loan debtors with their past- due accounts.

The impetus behind this pilot program is the fact that some private debt collectors who work for the nation's Department of Education have received billions of dollars, even though they have broken the law and mistreated those who have defaulted on their federally-funded student loans. Policymakers will analyze the results of this new initiative, which may give the Department of Education the justification it needs to oust private firms from the collection of federally funded student loans. Officials hope that federal employees would be able to collect more on delinquent loans for a lower cost than it currently pays private companies to do so. Currently, the Department of Education uses a number of private companies to collect past-due student loan payments before suffering consequences such as wage garnishment.

According to the Government Accountability Office (GAO), at least 83,000 people who are 64 years old and younger have been left with Social Security payments at poverty level after being unable to pay their federally funded student loans. According to the Department of Education, defaults in student loans have risen 11 percent to $99 billion.

Although student loans usually cannot be discharged through bankruptcy, there still are options for debt relief. For example, debtors can seek a forbearance or deferment. There are also usually a number of different types of repayment plans, some of which may be contingent on a debtor's income. Debtors struggling to repay their student loans may wish to speak to an attorney to help understand their options.

Source: Huffington Post, "Obama Administration Explores Ways To Collect Student Loans," Shahien Nasiripour and Ryan Grim, Nov. 13, 2014

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