The Federal Government categorizes the following loans as student loans: Perkins Loans, National Direct Student Loans (NDSL), and Defense Loans. The government has passed special legislation for the collection of student loans, favoring the creditor:
* Statute of Limitations: The statute of limitations (deadline for commencing a collection lawsuit) to enforce collection on Perkins Loans or National Direct Student Loans has been preempted by federal law, meaning that these loans can be pursued for the debtor’s lifetime.
* Non-Dischargeability: Under most circumstances, debts incurred under Perkins Loans or National Direct Student Loans under the Higher Education Act are not dischargeable in bankruptcy. Debtors may seek an exception based upon proof of special hardship, but that exception has been interpreted very narrowly.
* Recovery of Collection Costs: A creditor may recover reasonable collection costs on Perkins Loans or National Direct Student Loans. Recoverable costs may include the cost of address searches, collection actions including the cost of reporting defaulted accounts to credit bureaus, personal expenses incurred while collecting the debt, litigation expenses, attorney fees, and the costs of professional collection services such as the fees charged by collection agencies.
Student loan debtors are responsible for interest, which accrues at the contractual rate under the promissory note throughout the collection process.
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