Private Default and wage garnishment

Lompoc42 · #1 06-27-2006, 01:45 PM

I have a substantial amount of private student loan debt that has recently become unfeasible for me to repay in full every month. However, I have made a good faith payment every month.

Today I got a call which said my loan would soon go into default despite the fact I have been making good faith payments. How is this possible?

She gave me the spiel about wage garnishment and tax return stuff, but I live in New Zealand. I would find it hard to believe they could garnish my wages here.

Can anyone shed some light on this for me please?

aaron · #2 06-27-2006, 03:56 PM

I can't speak for New Zealand, but in the U.S. if you don't make the required monthly payments on your loan, you can be held to be in default. If you wish to negotiate a lower monthly payment, you have to work that out with your lender.

Lompoc42 · #3 06-27-2006, 10:48 PM

OK, perhaps I should clarify.

I'm an American ex-pat living in New Zealand. I have a private student loan (American student loan) which I haven't been able to pay the full amount of ($465USD/$775NZD a month) for several months now. That said, I have been paying a minimum of $125USD a month to them every single month.

Now they're threatening me with default and closure on my account to a collection agency.

I have no idea what to do or what my options are. Please, I don't want a reprimand about being irresponsible. I have a new baby and my fiance is only working part-time which means I can't pay the full amount. Are they able to garnish my wages or take action against me while I'm here? I figure that within a year I'll be able to resume full payments because my fiance will be working full-time again.

Should I just continue to pay what I can and then start paying in full when I can? Any help is appreciated.

aaron · #4 06-28-2006, 04:18 AM

It is possible, but seems unlikely, that they would try to enforce a U.S. student loan through New Zealand's courts. But depending upon what you mean by "substantial", there remains a possibility that they will attempt to do so.

I'm not sure what you mean by a reprimand. Your late payment history will already be reflected on your credit report, as would be any referral of the debt to a collection agency.

Lompoc42 · #5 06-28-2006, 11:10 PM

I feel a bit sheepish in saying so, but I owe $60k. I went to a school that was way too expensive for my means and never considered the consequences.

I should be able to resume normal payments within a year's time and hopefully when I attempt to move back to the states I'll have rehabilitated my credit.