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What are my options if a debt collection agency contacts me about my student loans?

A debt collector may be trying to contact you because a creditor believes you are past due on the payments you owe on a debt. You have rights when dealing with debt collectors and it is against the law for a collector to harass you or make false statements to you.

Ignoring or avoiding a debt collector is unlikely to make the debt collector stop contacting you and does not stop the debt collector from using other legal ways to collect the debt from you, if you owe it. If you believe you do not owe the debt, you should tell the debt collector.

The CFPB prepared sample letters that you can use to respond to a debt collector who is trying to collect a debt along with tips on how to use them. The sample letters may help you to get information, set ground rules about any further communication, or protect some of your rights.

Private student loans

If you have private student loans, there are no standard options for dealing with a collection agency on a private student loan, other than paying what is owed. However, you may be able to negotiate or set up a payment plan.

For private student loan borrowers in default, it is important to remember that there are major differences between federal and private student loans. A debt collector seeking to recover a private student loan does not work for, represent, or collect on behalf of the U.S. Department of Education or any other branch of the federal government. A debt collector trying to collect payments on a private student loan generally may not:

  • Garnish your wages without a court order;
  • Intercept your federal or state tax refund;
  • Garnish your Social Security or Social Security disability payments; or
  • Prevent you from receiving federal student aid to go back to school in the future.

Federal student loans

If you have federal student loans, you may have additional options in dealing with a federal student loan collector:

  1. Rehabilitation. Rehabilitation means that your loan will be taken out of default status after you make a series of consecutive (generally, nine) on-time, reasonable, and affordable payments.

    You can typically only rehabilitate a loan once. This is the only way to remove the default notation from your credit history. Rehabilitation does not remove the negative information on your credit history from the missed payments prior to default.

    If you chose to go back to school, you'll be eligible for federal student aid again after you make the sixth of nine monthly payments.
  2. Repayment. If you can afford to pay off your defaulted federal loan, this is the fastest way to settle your debt. Under certain circumstances, your debt collector may be authorized to waive some of your outstanding fees and other collection costs. For some borrowers, this can be the cheapest way to bring a federal student loan out of default.

    Even after you've repaid, the debt will continue to appear on your credit report as a defaulted loan that was repaid. You'll also be eligible for federal student aid again, if you chose to go back to school.
  3. Consolidation. Through consolidation, your defaulted loans are paid off by a new loan with new repayment terms. If you can't afford to repay your loan in full, consolidation is the fastest way to get out of default and enroll in one of the U.S. Department of Education’s alternative payment plans. If you can't afford to pay off your loan in full, it's also the fastest way to get out of default and be eligible for federal student aid again. Consolidation will not undo the negative effect on your credit report caused by your default.

    When speaking with a collector, be sure that you have written documentation about what federal student debt you owe. If you're concerned that you never borrowed these loans, check the U.S. Department of Education’s Federal Student Aid website. Through this website you can access information about your federal student loans. If the loan does not appear there, contact the collector and inform it of the problem. Remember, that system shows only your federal student loans, not your private student loans.

If a debt collector refuses to offer you an option for which you believe you qualify, ask to speak with the debt collector's Special Assistance Unit. If your issue has not been resolved through the servicer's Special Assistance Unit, you may wish to review your options through the Federal Student Aid Ombudsman Group at the U.S. Department of Education.