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Handling Default

 

Handling Default


Consequences of Student Loan Default


Administrative Wage Garnishment

If you do not voluntarily make arrangements to pay back your student loan(s), money to repay your debt could be deducted directly from your paycheck, without your consent. Federal regulations require guarantors, like TG, to collect payment on a student loan debt through a deduction from a borrower's wages, known as Administrative Wage Garnishment.

You could have up to 15 percent of your disposable income* garnished, or withheld, from your paycheck each pay period to make payments on your student loan debt. If you have multiple loans held by multiple guarantors or the Department of Education (ED), you could have up to 25 percent of your disposable income garnished.

By law, you have certain rights when you are facing Administrative Wage Garnishment, including:

  • You can inspect and copy records relating to your debt.
  • You can establish a repayment plan if an Order of Withholding from Earnings has not been issued.
  • You can request a hearing.
  • An employer may not fire you, refuse to employ you, or discipline you because your wages are garnished.

At least 30 days before the initiation of garnishment proceedings, TG will mail to your last known address a written notice that describes your student loan debt, states TG's intention to collect the debt through deductions from your wages, and provides an explanation of your rights. If you do not send your payment within the time period stated on this Notice Prior to Wage Withholding, then your wages may be withheld. Generally, once wage garnishment has been initiated, the wage withholding order will remain in place until your employment is terminated or your loan(s) is paid in full.

Payments withheld under Administrative Wage Garnishment will not appear as voluntary payments on your credit report although they will be deducted from your balance. In addition, if you are subject to Administrative Wage Garnishment, you may not reinstate your federal student aid eligibility.

If you have been notified that TG is planning to garnish your wages and you want to find out more about your rights or how to avoid having your wages withheld, call (800) 222-6297, ext. 4125, or send TG an email message.

* Disposable income is the amount of your total (gross) salary minus any deductions required by law — such as state and/or federal income tax, child support, and mandatory retirement deductions. In the state of Texas, your employer may also charge an administrative processing fee of up to $10 per transaction.

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Collection Costs

When you signed your promissory note, you agreed to repay the lender for your loan(s). You also agreed that if you defaulted on your loan(s), you would pay the cost of collecting on your debt. Collection costs of up to 24.34% (maximum statutory rate) may be added to the balance of your loan(s). Collection cost rates are recalculated annually and the percentage rate is subject to change due to factors such as a change in administrative costs, or whether your account is assigned to a collection agency or attorney (see Collection Vendors below). Upon recalculation, the adjustment in the rate could cause an increase or decrease in the total balance due on your account.

The total balance due on your account changes daily as simple interest accrues. Collection costs are calculated as a percentage of the total principal and accrued interest balance. The total amount due on any given day includes all principal, accrued interest, and the applicable percentage rate of collection costs.

Fortunately, if you set up a repayment arrangement and make your first payment within the first 60 days of the default claim payment date, collection costs will not be added to your account as long as your account remains current. If your account ever becomes 60 days past due on the new arrangement, collection costs will be assessed at that time and will remain on your account until it is paid in full.

For more information on collection costs, call TG at (800) 222-6297 or send TG an email message.

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Collection Contractors

If you fail to establish a repayment arrangement with TG, TG may refer your account to a collection contractor for additional collection efforts. If your account has been referred to one of the following contractors, you will need to contact that agency to establish a repayment arrangement.

Account Control Technology, Inc.
(866) 744-1169
Correspondence
21700 Oxnard Street, Ste. 1400
Woodland Hills, CA 91367
Payment Address
P.O. Box 8012
Canoga Park, CA 91303
Education Assistance Services, Inc.
(888) 687-5580
Correspondence
P.O. Box 6714
Round Rock, TX 78683-6714
Payment Address
P.O. Box 6714
Round Rock, TX 78683-6714
General Revenue Corporation
(800) 436-5285
Correspondence
11501 Northlake Dr.
Cincinnati, OH 45249
Payment Address
P.O. Box 9534
Cincinnati, OH 45242
Regional Adjustment Bureau, Inc.
(800) 668-5715
1900 Charles Bryan, Suite 110
Cordova, TN 38016
Van Ru Credit Corporation
(877) 289-7109
Correspondence
1350 E. Touhy Ave., Ste. 300E
Des Plaines, IL 60018
Payment Address
P.O. Box 2582
Des Plaines, IL 60017

For more information on collection contractors, call TG at (800) 222-6297 or send TG an email message.

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Credit Reporting

Federal regulations require TG to report certain information, such as the original default amount and current balance of each of your defaulted loans, to all nationwide consumer reporting agencies. TG is also required to report the status of your loan(s) during repayment, such as delinquent payments. Even when your loan(s) is paid in full, dismissed in bankruptcy, or consolidated, the record of your defaulted student loan (i.e., collection record) will continue to show up on your credit report for seven years from the date of delinquency which led to the default.

TG reports credit information to the following four nationwide consumer reporting agencies:

Equifax Credit Information Services
Phone: (800) 759-5979

TransUnion
Phone: (800) 916-8800

Experian
Phone: (888) 397-3742

Innovis Data Solutions
Phone: (800) 540-2505

Has your loan(s) already been reported as a default on your credit report? You can still contact TG and establish a repayment arrangement on your loan(s). If you do, TG will report to all nationwide consumer reporting agencies that you are in a voluntary repayment schedule on your loan(s). If you continue to make voluntary payments on an accepted repayment schedule, you may qualify for TG's rehabilitation program.

After you have successfully completed TG's rehabilitation program, TG will delete its reporting of the default to all national consumer reporting agencies. In addition, TG will request that the lender that filed the default claim on your student loan(s) also remove the default status from your credit report. TG currently has regular monthly sales to rehabilitating lenders; however, the purchase of your loan(s) for rehabilitation is at the discretion of the lender. Therefore, you may be required to continue making scheduled payments until a rehabilitating lender purchases you loan(s). Once your loan(s) has been purchased, the default status is removed from your credit report. If you are interested in more information regarding the rehabilitation program, please call TG at (800) 222-6297 or send TG an email message.

Remember, if TG uses other means to obtain repayment of your loan(s), such as wage garnishment or Treasury Offset of your tax return (see Treasury Offset Program below), these payments will not appear as voluntary payments on your credit report, although they will be deducted from your balance.

If the information on your credit report appears inaccurate or you disagree with the accuracy or completeness of the information being reported to the nationwide consumer reporting agencies, please contact TG for clarification. TG representatives will answer your questions or send you information to assist you in addressing your concerns about your credit report.

You can also complete and return a copy of the TG Credit Bureau Dispute Form. Please note that this form is for TG defaulted student loans only. If you are disputing any other non-TG accounts or other items on your credit report, you will need to contact either the national consumer reporting agency directly or the financial institution that is reporting the information to resolve your dispute.

For more information on credit reporting, call TG at (800) 222-6297 or send TG an email message.

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Loss of Eligibility for Federal Student Aid (with option for Reinstatement)

If you default on a student loan(s) that was guaranteed by TG, TG becomes the holder of your loan. One of the consequences of default is the loss of eligibility for additional federal student aid. Your eligibility for federal student aid may be reinstated if you request to make satisfactory repayment arrangements with TG. Under these arrangements, you must make six consecutive, voluntary, on-time, full monthly payments to TG before you will be eligible for additional federal student aid. After you meet these qualifications, TG will send appropriate notification to your school, upon request, that you have fulfilled your obligations under these arrangements.

Once your federal student aid eligibility has been reinstated, you must remain current on your loan payments throughout the repayment period. If you do not remain current in making your monthly payments, you will become ineligible for additional federal student aid until your defaulted loan(s) is paid in full.

For more information on how to set up repayment arrangements and/or to request reinstatement of your federal student aid eligibility, call TG at (800) 222-6297 or send TG an email message.

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Texas Lottery

If your student loan(s) is in default, the Texas Lottery Commission is required to withhold your winnings to satisfy your TG student loan debt. For more information, call TG at (800) 222-6297 or send TG an email message.

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Texas Professional License

Renewal of your Texas state occupational/professional license (e.g., Cosmetology, Real Estate, Optometry, etc.) may be withheld if you are in default on your TG student loan(s).

You must have established a satisfactory repayment arrangement with TG and be current in your payments before a license release letter will be sent to the licensing agency.

For more information on how to set up repayment and/or request a license release letter, call TG at (800) 222-6297 or send TG an email message.

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Texas State Bar Attorney License

Your Texas State Bar attorney license may be suspended if you default on your TG student loan(s).

You must have established a satisfactory repayment arrangement with TG and be current in your payments before a license release letter will be sent to you.

It is your responsibility to forward the State Bar license release letter to:

State Bar of Texas
Membership Department
P.O. Box 12487
Austin, TX 78711

For more information on how to set up repayment and/or request a State Bar license release letter, call TG at (800) 222-6297 or send TG an email message.

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Texas State Comptroller

Reimbursements (warrants) from the Texas State Comptroller may be withheld once your TG student loan has defaulted.

You must have established a satisfactory repayment arrangement with TG and be current in your payments before a warrant release will be issued to the Texas State Comptroller.

Alternatively, you may satisfy your student loan debt by signing over to TG a portion or all of the funds held by the Texas State Comptroller using the Texas Power of Attorney form located on the back of your notification letter from the Texas State Comptroller. Additional warrants to the Texas State Comptroller can be released by request as long as your account remains in a current status.

The Texas Power of Attorney form must be completed, certified, notarized, and mailed to:

TG
Attn: Analysis Dept.
P.O. Box 83100
Round Rock, TX 78683-3100

For more information on repayment and/or to request a warrant release letter, call TG at (800) 222-6297 or send TG an email message.

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Transcripts and Academic Records

If your TG student loan(s) is in default, your school may not release certain academic records (i.e., enrollment/attendance records, academic transcripts, certificates, degrees, etc.).

Each school has an individual policy for releasing certain academic records. Some schools may require additional documentation or verification of your current repayment status before releasing records or transcripts.

To request more information on release of academic records or to set up repayment arrangements, call TG at (800) 222-6297 or send TG an email message.

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Treasury Offset Program

When you are eligible to receive money from the federal government, such as an income tax refund, that money can be diverted to repay your defaulted student loan(s). This is known as a Treasury offset and is required by federal law and regulations.

If you have defaulted on your student loan(s), your loan(s) may be certified for participation in the Treasury offset program. If you establish a repayment agreement satisfactory to TG and continue to make timely payments, your loan(s) will not be subject to Treasury offset. However, if you become delinquent in your repayment agreement, you may once again be subject to Treasury offset.

By federal law and regulations, you have certain rights when you are facing Treasury offset:

  • You must be notified that TG is proposing to use Treasury offset to collect money from you. A notice will be sent to the address you used when filing your most recent federal income tax return.
  • You must be given an opportunity to:
    • Avoid offset by arranging to repay your loan,
    • Review any records about your loan,
    • Show why the loan is not in default, is not delinquent, or why you aren't legally responsible for repaying it.
    • If your spouse's tax refund was subject to Treasury offset because of your federal debt, your spouse may be entitled to claim his or her return. You can contact the IRS about your Treasury offset at (800) 304-3107.
    • The notice you receive will explain your rights with regard to the Treasury offset process.

If tax refunds or other federal payments are withheld, they will not appear as voluntary payments on your credit report although they will be deducted from your balance. In addition, Treasury offsets do not count toward any program that requires voluntary payments such as reinstatement or rehabilitation.

Borrowers receiving a letter from TG warning of possible Treasury offset should call TG at (800) 222-6297 or send TG an email message.



Here are other documents located on www.tgslc.org that you may be interested in:

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