New legislation is being proposed that could change the debt collection system in for student loans. Under the new system, student loan payments would be automatically withdrawn from borrowers’ paychecks.
With this new bill employers would withhold payments from wages in the same way they withhold taxes. The maximum payment withdrawn would be 15 percent of a borrowers’ income, after basic living expenses are covered. The new bill is in response to increasing concern about the student loan epidemic. Currently, there is $1 trillion in outstanding student loans, which is more than all the credit card debt combined. Most of those loans are federally insured, meaning that the federal government picks up the tab when borrowers default. The federal government then contracts with private debt collectors in some instances in an attempt to collect the debt.
Under the proposed law, the government most likely wouldn’t need to use private debt collection companies to collect from borrowers that are employed, and borrowers wouldn’t face extra fees if they miss a few payments or default. Because the payment schedule is tied to income and would be withdrawn automatically, borrowers wouldn’t negotiate with collectors or loan servicing companies. Instead, the Department of Education would manage the automatic withdrawals with assistance from the IRS. Similar plans are already in place in the U.K., Australia and New Zealand.
If you are being harassed by student loan debt collectors please call my office, The Law Offices of Todd M. Friedman at (877) 449-8898 to discuss your case.