How Student Loans Can Put a Lien on Your House and What To Do

Student loans provide access to higher education, but they come at a price. Failing to repay student loans can lead to damaged credit, garnished wages, seized tax refunds, and even the government placing a lien against your property.

For federal and private student loans alike, defaulting on your debt can open the door for lenders to pursue legal action to collect what you owe And if they win a judgment, one of the most severe consequences is the ability to place a lien on your house

In this comprehensive guide we’ll look at how student loans can put a lien on your home what it means, options to remove the lien, and most importantly, tips to proactively avoid ever reaching this worst-case scenario.

Can Student Loans Legally Put a Lien on Your House?

Let’s start by looking at how a student loan lien can happen legally:

• Defaults on payments – Consistently missing monthly student loan payments leads to delinquency and ultimately default status after 270+ days past due.

• Goes to court – The lender sues you for the unpaid debt and wins a legal monetary judgment against you.

• Applies lien – With judgment in hand, the lender can request the court to place a lien on your assets like real estate property.

• Property identified – The lender does a title search to identify property ownership and see available equity.

• Lien recorded – The lien is officially recorded with the county/township and attached to the property’s title.

This legal process allows the lender to take ownership of the property as repayment for the judgment on your unpaid student loans.

A lien prevents you from being able to sell the home or take any actions with the title until the lien is satisfied – whether through a lump sum payment, structured settlement, or forced sale of the home by the lender.

The key is avoiding student loan default in the first place to eliminate the risks of lawsuits, judgments, and liens that can result.

Federal vs. Private Student Loan Liens

While both federal and private student loans can potentially lead to property liens, there are some differences:

• The federal government will first pursue other collection tools like wage/benefit garnishment before resorting to a lawsuit. Private lenders can sue more quickly.

• Private lenders need to secure a court judgment before placing a lien, while the federal government has more power to bypass court proceedings if needed.

• Federal liens may be limited to equity value, while private lenders can take ownership of the full property.

• Removing federal education liens may involve loan rehabilitation, while private liens require repaying the judgment or proving an improper lawsuit.

Either way, you want to correct any federal default through consolidation or rehabilitation and seek help immediately if facing legal action from private lenders. Don’t wait for a lien to actually get recorded against your home.

What Happens When Your House Has a Student Loan Lien?

If the worst happens and a lien related to your student loan debt gets attached to your property, here are some potential effects:

• Your credit score tanks from the default itself and any additional late payments. This makes it hard to qualify for loans, credit cards, affordable insurance, cell phone plans, utilities, rentals, and more.

• You are unable to sell the home, transfer title, or refinance the mortgage unless the lien is paid in full at closing. Any potential home sale falls through.

• If you want to remove the lien, you may need to settle the debt which could require coming up with a large lump-sum payment.

• The lien remains in place for up to 15 years until the statute of limitations runs out, or indefinitely if renewed by the lender.

• The lender can force a sale of the home if you don’t pay off the lien, leaving you without your property.

• Foreclosure is possible if the lien prevents you from refinancing or paying off an existing mortgage.

• Your credit reputation in the community is damaged, which can even hurt job applications requiring a background or credit check.

The consequences underscore why avoiding default and resolving debts before it reaches a lawsuit is critical. But if you find yourself facing a recorded lien, don’t panic. There are still options.

How to Remove a Student Loan Lien from Your House

If student loans end up putting a lien against your home, you have several options to get it removed:

• Pay off the lien – Come up with the money through savings, borrowing from family, cash-out mortgage refinance, or home equity loan to pay the judgment and associated legal fees. Get the repayment terms in writing first.

• Prove improper service – Research details of the lawsuit and look for any defects like you not being properly served. File a motion to set aside the judgment.

• File for bankruptcy – Bankruptcy may remove student loan liens, either directly or by giving you grounds to reopen the judgment. Consult a bankruptcy attorney.

• Apply for hardship – For federal loans, enter rehabilitation to have the loans and any judgment/lien removed from your credit report after making 9-12 qualifying payments.

• Request a payment plan – Ask the lender if you can repay the judgment over an extended period rather than a lump sum. Get terms in writing.

• Sell the house – If needed, you can sell the home and use the sale proceeds to satisfy the lien as part of closing. Not ideal but prevents forced sale later.

The path that makes sense depends on your financial situation. The key is acting quickly before the lender pursues foreclosure. If you receive any notice related to student loans, lawsuit, or lien, seek legal support promptly.

Avoiding Student Loans Putting a Lien on Your Property

While dealing with an existing lien can be complicated and costly, the best approach by far is stopping the situation before it ever occurs. Here are proactive tips to keep student loans from ever threatening your home ownership:

• Make at least minimum monthly payments on time every month without fail

• Look into income-driven repayment plans to lower federal loan payments

• Apply for deferment or forbearance if you need a temporary payment break

• Refinance private loans to lower interest rates and monthly payment amount

• Communicate with lenders early if struggling to make payments

• Consolidate federal loans or rehabilitate to get out of default as soon as possible

• Seek student loan counseling and legal help at the first sign of trouble

• Build an emergency fund covering 3-6 months of expenses as a financial cushion

• Explore second job or side gig opportunities to boost your income

• Review budget for any areas to cut spending and direct more to student loans

Avoiding delinquency and staying on top of your account is by far the best way to keep lenders from pursuing legal action down the road.

You Have Options – Don’t Wait to Get Student Loan Help

Dealing with student loans putting a lien on your property can be overwhelming and stressful. But remember that options exist, and the situation is fixable with the right legal guidance and debt resolution plan.

If you receive any notification about pending legal action related to your student loans, immediately contact an attorney specializing in student loan debt for advice and representation. The sooner you respond and address it, the more leverage you will have in negotiating a settlement and protecting your assets.

With proper action, you can resolve the debts before a lien is ever recorded, or remove the lien quickly if already in place. Don’t wait – be proactive and dedicated to resolving student loan issues with the help of a legal expert looking out for your best interests.

Get Legal Help to Protect Against Student Loan Liens

Has this guide helped you realize the importance of taking swift action if facing legal threats related to student loans? Our attorneys have extensive experience helping borrowers facing lawsuits, judgments, or liens from their education debt. We know how to examine your case for defects, present the best legal arguments to stop collections against your property, and negotiate settlements that resolve the issue without paying full judgment balances. If you’re worried about saving your home from threatened student loan collections, we offer a free case review to discuss your situation and go over options. Let us help you get this burden off your shoulders so you can sleep better at night. Give us a call today!