Student Loans Default Prison.

The rules for federal student-loan repayment, forgiveness, default, and rehabilitation are primarily established by federal law. While private companies lend student loans through the federal program, these lenders are required to follow the rules and regulations set by the U.S. Department of Education. By contrast, private student loans are governed by the borrower’s loan contract and applicable state law, and they generally do not have the same federal income-driven repayment or loan forgiveness programs.

For those with federal student loans, incarceration in a federal prison does not cancel the borrower’s loan balance or automatically qualify the borrower for federal student-loan forgiveness. While the U.S. Department of Education provides guidelines for handling loan repayment for incarcerated federal borrowers, these guidelines are intended to assist borrowers who are unable to make payments. They do not provide for debt cancellation based on incarceration.

To qualify for federal student-loan forgiveness, borrowers typically must meet specific legal or financial requirements, such as death or total and permanent disability. Incarceration itself is not a qualifying event for forgiveness. However, federal borrowers who are unable to meet their repayment obligations may be eligible for income-based repayment or other forms of debt relief under federal law.

Private student-loan remedies are different. The remedies available for borrowers of private student loans depend entirely on the terms of their individual loan contracts and the laws of the state that governs the agreement. While federal student loan borrowers have recourse under federal law, private student loan borrowers must look to their contracts and state law for assistance. Private lenders are generally not required to offer the same protections and relief options as the federal student-loan program.

How can federal default reach Florida wages?

If a federal student loan defaults, federal law permits a guaranty agency or the U.S. Department of Education to seek administrative garnishment of the borrower’s wages. Administrative garnishment is a procedure whereby a government agency or a licensed servicer can seek garnishment of wages without first obtaining a court judgment in a civil enforcement action. This allows the creditor to seek garnishment of up to fifteen percent of the borrower’s disposable pay, and, importantly, Florida’s head-of-family exemption under Section 222.11 does not block administrative garnishment.

In contrast, in order to pursue wage garnishment for private student loans, private creditors typically must first pursue a lawsuit for breach of contract and secure a final judgment. This puts the private lender in the position of an ordinary creditor, and such creditors are subject to the protections and exemptions afforded to Florida residents under Florida’s Wage Garnishment Act. Florida limits ordinary wage garnishment to the lesser of two statutory amounts, and, most importantly, provides protection to the qualifying head-of-family wages of workers whose household incomes are at or below the level prescribed by the Florida Legislature.

Florida Statutes section 222.11 generally exempts the disposable earnings of a head of family when those earnings are $750 or less per week, subject to the statute’s terms. Under Florida law, ordinary creditors cannot seek garnishment against protected wages, and any attempt to do so must be quashed. However, federal law expressly permits administrative garnishment notwithstanding state law, including Florida’s wage-exemption protections. This statutory carve-out allows federal student loan lenders and the U.S. Department of Education to reach disposable pay that would otherwise be exempt from garnishment.

When federal borrowers’ (or co-signers’ or guarantors’) wages are targeted under administrative garnishment, they have few options to protect their earnings beyond pursuing income-based repayment and seeking to cure their default. Florida workers and student borrowers who are facing or seeking to avoid the prospect of garnished wages should immediately consult with a student loan defense lawyer.

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Which income-based options can lower federal loan payments?

There are several ways for federal borrowers to reduce their monthly payments or seek forgiveness, and many of these options depend on the borrower’s (or co-signer’s or guarantor’s) income and family size. Income-driven repayment plans recalculate payments annually based on the borrower’s income and family size, and they apply to federal loans for undergraduate, graduate, or professional studies. Most qualifying loans may be eligible for these plans, though borrowers who cannot qualify for one of the repayment options listed below can still talk to their student loan defense attorney about repayment and discharge options under the Higher Education Act and applicable state law.

The Income Contingent Repayment (ICR) plan has no initial income requirement, and under the program, borrowers may generally owe 20 percent of their discretionary income each month, where discretionary income is defined as income above the poverty guideline amount. The amount the borrower owes is recalculated annually based on the borrower’s income and family size, and the payment is the lesser of 20 percent of discretionary income or the amount due under a 12-year fixed repayment plan adjusted for income.

However, federal loan repayment is not forever. If federal student loans are in repayment, the creditor may be able to forgive the borrower’s remaining balance in some cases. In the ICR program, the borrower’s unpaid remaining balance will be forgiven after twenty-five years of repayment. Under Public Service Loan Forgiveness, the remaining balance can be forgiven after ten years of qualifying repayment. However, under both of these plans, there is a significant downside: forgiveness is not free. When the borrower’s remaining balance is forgiven under ICR, the forgiven amount generally can be considered taxable income; forgiveness under PSLF generally is not taxable income. If the borrower’s forgiven debt is not tax-free, the tax liability can be substantial, and the taxing authority may be entitled to amounts owed.

Federal Student Loans and Private Student Loans: What Are the Key Differences?

While there are some similarities between federal and private student loans, federal loan borrowers have several options for debt reduction and protection from lawsuits. These options exist, primarily, because of federal law governing federal loans. With these protections, federal loan borrowers can feel more confident about their options in the event of unforeseen circumstances. However, if you have taken out loans from a private entity, you do not have the same protections and need to consult with your student loan defense attorney about repayment and discharge options under applicable federal bankruptcy law and state law.

Can the FBI, Trump, or bankruptcy change what you owe?

There is no FBI student-loan forgiveness program. No matter what, any solicitation or advertisement claiming this should be treated as a scam. And while there are rumors of a Trump loan forgiveness program, there is no program by that name. If you have questions about your eligibility to seek forgiveness, our experienced student loan defense lawyers can evaluate your circumstances and provide informed advice. To get started, schedule a free and confidential consultation with our team today.

Regarding bankruptcy, the bankruptcy court generally will not discharge student loans unless the debtor obtains a court determination that excluding the debt from discharge would impose an undue hardship. To secure discharge, the debtor must initiate an adversary proceeding under the requirements outlined in 11 U.S.C. section 523(a)(8), a requirement that was strengthened through the legislation Congress enacted in 2005. However, while discharges are not as common as they used to be, it remains an option for bankruptcy victims of abusive lenders and unscrupulous lawyers. You can research your eligibility to file for student-loan bankruptcy under federal law, and you can pursue discharge by initiating an adversary proceeding in bankruptcy court. The steps involved can be complex; and if you cannot or do not want to do this alone, you should talk to your bankruptcy lawyer.

How to Seek Legal Assistance with Student Loan Debt

If you have questions about pursuing student loan forgiveness, negotiating a repayment plan, or defending against litigation, you will need legal assistance. If you are interested in working with a law firm, Spodek Law Group has experienced student loan defense attorneys and bankruptcy lawyers who provide comprehensive services to students and alumni nationwide. If you are unable to afford private legal services, there are numerous legal-aid organizations nationwide that offer free assistance to those who meet certain income requirements. You can research the resources available to you on the legal-aid organization’s website. For additional resources, you can check the websites of the National Association of Consumer Advocates, which provides referrals to consumer lawyers, and the National Association of Consumer Bankruptcy Attorneys, which provides referrals to experienced bankruptcy attorneys.

Contact a Federal Criminal Defense Attorney

Nothing here is legal advice, and the details of your case matter. Todd Spodek and Spodek Law Group take federal criminal and white collar cases nationwide, from offices in New York, Brooklyn, Queens and Los Angeles. You can reach the firm at 888 348 8028.