Government gets serious on student loan defaults

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With more people going back to work and the economy showing some signs of recovery, the fallout from the recession might be considered over by some.

But this isn't the case for millions of Americans who continue to deal with the long-term impacts of the Great Recession, whether it's the 9% of us who are still unemployed or the college students and graduates who face increasing student loan debt and a higher rate of default.

Unlike third party debt collectors for average consumer debt, much student loan debt is owed to the government.

And in the world of debt collection, the federal government has the farthest reach and access to the most aggressive collection methods.

The U.S. Department of Education is wielding this impressive arsenal by referring more than 5,000 loans in default to the Justice Department for legal action, USA Today reported this month. That 2010 figure is more than double the referrals made in 2009.

Students are encouraged to work with the government to establish a repayment plan on which all parties can agree.

“The most important thing to remember is we want the loans repaid," an Education Department spokesman told the paper.

Once the government institutes a lawsuit, it may use wage garnishments and property liens to recover money owed on a defaulted student loan. In addition, any parent who co-signed on the loan may be held responsible for the money owed.

Use our student loan debt consolidation calculator to see if consolidating your debt can help you get your finances back on track.