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What Does Student Loan Permanently Assigned to Government Mean?


If you have student loan debt, then you may be wondering what it means when your student loan is “permanently assigned to the government.” This is a common question, and the answer will depend on the type of student loans in default.

For example, if you owe federal student loans, the most likely explanation for this phrase is that they were transferred to a collection agency. If you owe private student loans or Perkins Loans, then your loan was probably sent directly to collections with no involvement from the government at all.

This blog post will detail what each scenario looks like and offer advice on dealing with them!

What Does Student Loan Permanently Assign to Government Mean?

Having a “government claim/insurance claim” status on a student loan indicates three things:

  • A guaranty agency owns a federal student loan that you failed to pay back.
  • The government-insured the loan.
  • Your debt was reimbursed in full by insurance, and the government is now collecting on it.

Most likely, the Department of Education’s Default Resolution Group has been assigned to the loan. It’s possible that the DRG has kept your loan or transferred it to one of the government’s private debt collectors.

Is the Government Holding My Student Loan?

The federal government administers the vast majority of student loans. Contact the Federal Student Aid Center at 800-433-3243 to determine if the government owns your loan. A private student loan is a debt on your credit record that is not owned by the Department of Education and is instead held by a bank or other financial institution.

National Debt Relief is rated #1 for debt consolidation

How Does it Affect Me?

  • The consequences of the government taking up student debt include:
  • Salary garnishment for students’ school loans
  • Taxes and Social Security benefits are canceled out
  • Cannot get a Federal Housing Administration (FHA) loan
  • Excluded from government financial aid programs such as Title IV (new federal student loans, grants, etc.)
  • Losing one’s license to practice (depending on state law)
  • Inability to qualify for debt forgiveness or repayment choices based on one’s salary

What to Do if the Government Has Taken Over Your Student Loan Debt?

Three choices are available to students who fail on their student loans: repayment, rehabilitation, and consolidation. The ideal choice for you will depend on what is most important to you.

If you want to get rid of your loans for good, make the following: Repayment.

There are no grace periods or grace periods once a student loan defaults. Alternatively, you might choose to pay that sum and be out of debt.

Negotiating a lower student debt settlement may also be possible, but don’t expect to save much money. Typical federal student loan settlements reduce collection costs and save you around 10% of the outstanding sum.

For those who desire to improve their credit rating: Loan Rehabilitation

Because student loan rehabilitation eliminates the default from your credit report, it is frequently the best choice to repair your credit. However, the outstanding debts will stay in place for seven years.

Rehabilitating your loans is possible by calling the collecting agency assigned to your debt and asking to join the program, which is free of charge. Nine monthly loan payments must be made over ten consecutive months as part of the debt rehabilitation program.

You’ll pay 15% of your discretionary money each month. If you are unable to afford that sum, you may request an alternative amount.

Student debt may only be rehabilitated once. Consider your financial situation before deciding on this choice, and make sure your contact information is up to date. Inquire with your new lender about the possibility of switching to a payment schedule based on your income instead of your principal and interest.

If you want to get out of default mode quickly: Consolidation.

To be eligible for an FHA loan, borrowers who want to go back to school or clear their CAIVRS must exit default as promptly as possible. A student loan consolidation maybe you’re the best option if you can’t afford to settle your debt.

You can apply for a Direct Consolidation Loan by one of the following methods:

You must make three complete, on-time, consecutive monthly payments to get the loan back on track.

  • Accept the terms of a repayment plan based on your income.

If you have loans with a collection agency, you may begin the consolidation process by contacting them, or you can go to to get started.

  • You will still have a default line on your credit report if you consolidate your debts.

You may be able to consolidate again if you have already done so. FFEL Consolidation Loan holders are permitted to reduce again. The Direct Loan Program will be used to disburse the new loan.

What Happens if You Don’t Pay Your Student Loans?

You are a ‘Delinquent.’

Delinquency occurs when a loan payment is more than 90 days late. All three main credit bureaus are aware of this. Your credit rating will suffer as a result.

Due to this policy, new credit applications may be rejected or provided only at higher interest rates offered to riskier borrowers. There are several ways in which a negative credit rating might follow you.

Credit scores can be used as a gauge of a person’s character by potential employers. The same goes for cell phone service providers, who may reject the service contract you’d want.

How soon can you be debt free?

Customers who are deemed untrustworthy by utility providers may be required to put down a security deposit. A potential landlord may turn down your request.

The Account is ‘ID default.’

You are technically in default if your payment is more than 270 days overdue. Depending on the financial institution, you may be referred to a collection agency to collect your debt. The agency will try its utmost to get you to pay, excluding any acts forbidden by the FDCPA (FDCPA). Debt collectors may tack on additional fees to cover the costs of collecting the debt.

Although it may be years before the federal government gets involved, the federal government has enormous influence when it does. Your tax refund might be used to pay off your debts.

Payroll deductions are possible, which means the government will collect a percentage of the money you earn from the company you work for.

Do You Need Assistance with Your Loans?

We are here to help if you’re feeling overwhelmed by all of this information. We have been helping people like you get their federal student loans out of default for a long time now.

Call us now to set up a free consultation. We will devise a strategy that takes your present financial status into Account while positioning you to achieve your long-term objectives.