Student Loans – Public or Private?
Federal Student Loans
Federal student loans are student loans that are made or guaranteed by the federal government. Otherwise they are classified as private student loans. Before filing bankruptcy to address student loan debt consideration should be given to non-bankruptcy options.
Federal loans typically have a number of options, including: deferment, forbearance, and consolidation. You also may be eligible for various Income-Driven Repayment (IDR) plans that are based upon the size of the debt, and your income and family size. These plans can reduce the monthly loan payment, and lead to eventual loan forgiveness.
Federal loan lenders, unfortunately, are armed with very significant legal rights. There is no statute of limitations on a federal loan. Federal lenders, without even filing a lawsuit, can garnish your wages and seize your tax refund.
Private Student Loans
Private loans, by contrast, do not offer the variety of programs available to federal loan borrowers. Private lenders, however, do not possess the same legal rights as the federal loan lenders. There do exist statutes of limitations on private loans. Also, these lenders must file suit (and recover judgment) before they can garnish your wages, garnish a bank account, or seize other property.