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<p>It would seem that even the Department of Education is not beyond making mistakes. The <a href="https://www.insidehighered.com/news/2017/01/16/feds-data-error-inflated-loan-repayment-rates-college-scorecard" target="_blank">DOE was recently caught</a> making a student loan error. According to a recent report, the agency waited months before advising the public that a huge error had been made on student loan defaults. At the same time, the Department issued regulations hammering for-profit schools based on that error.</p><p>Prior to owning up to the mistake, the DOE had claimed that only one-third of all student loans had never entered repayment and that more than half of student loans from for-profit schools never entered repayment. According to that calculation, the Department issued a rule requiring for-profit schools to include a warning in all promotional materials advising the public that their students tended to avoid paying back loans. Both non-profit private colleges and state-based colleges are exempt from the disclosure.</p><p>It was not just bad math where the Department of Education erred, however. In fact, the Department of Education may have made a deliberate attempt to place the blame for student-loan defaults on the lackluster career performance of students who graduate from for-profit schools.</p><p>More recently, it has been learned that the long-term performance of student-loan defaults appears to be about the same between not-for-profit schools and for-profit schools.</p><p>According to a <a href="https://ifap.ed.gov/eannouncements/011317UpdatedDataForCollegeScorecardFinaidShopSheet.html" target="_blank">memo issued by the Department of Education</a>, previous statistics regarding student loan repayment had been reported erroneously as a result of a programming error. Rates for repayment had been overstated for all but a small percentage of the listed trade schools and colleges.</p><p>A review of the revised information found that the status of student loan repayment is grimmer than at first believed. At more than 1,000 of the schools, at least half of the students had either made no payments at all against their loans within seven years or had defaulted on their loans.</p><p>Such a large-scale non-payment of student loans can have a tremendous economic impact. Since <a href="https://lendedu.com/blog/how-to-pay-off-student-loans-fast" target="_blank">student loan debt typically cannot be discharged</a> using bankruptcy, the ramifications of defaults can be significant. Without some form of debt relief or forgiveness program, there is the very real risk that a large portion of a single generation could find themselves falling victim to economic tragedy. For instance, large numbers of borrowers who have <a href="https://en.wikipedia.org/wiki/Student_loan_default_in_the_United_States" target="_blank">defaulted on their student loans</a> may be unable to afford a home. Others may be unable to begin a family due to the serious economic burden they carry or save a sufficient amount of money for retirement.</p><p>The consequences of defaulting on student loan debt can certainly be serious. Among those consequences is the ability of the IRS to intercept any tax refunds to which you might be entitled until your loans are paid in full. Each year, the Department of Education collects hundreds of millions of dollars through the interception of tax refunds, a process known as a tax refund offset.</p><p>Additionally, borrowers can have their paychecks garnished. If this happens, the government has the ability to take a limited portion of a borrower&#8217;s wages when he or she is in default on student loans. The <a href="https://www.dol.gov/whd/regs/compliance/whdfs30.htm" target="_blank">cap for wage garnishments</a> is 15 percent or not more than 30 times the current federal minimum wage. In some cases, borrowers may be able to object to a wage garnishment, but this typically involves hiring an attorney, something that many borrowers who are in default may not be able to afford to do. Another option to avoid having one&#8217;s wages garnished would be to negotiate a repayment schedule with the holder of the loan.</p><p>Borrowers who are in default could also have their federal benefits taken, including Social Security disability benefits and Social Security retirement benefits. There are some limits. For example, the government cannot take more than 15 percent of a borrower&#8217;s total benefits. The government also cannot take any amount from a borrower&#8217;s benefits that would leave him or her with less than $750 per month or $9,000 per year.</p><p>Private lenders, as well as the government, also have the option to file a lawsuit against student loan borrowers who are in default. While there is a time limit on suing to collect other types of debt, that is not the case with student loans. Even if you defaulted on the loan 30 years ago, the government or a private lender could still go after you for the debt. The best course of action is for borrowers to attempt to negotiate some type of payment.</p><style>
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<div class="metaInfo"><bylineMeta><p>By Terry Davis</p><p>LendEDU</p></bylineMeta></div>

Department of Education caught making student loan miscalculation