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#1 06-02-2008, 06:42 PM

Here's my problem, could I get some advice please?

I went to college from 1996 to 2001 on student loans. When I finished college in spring of '01 I thought my parents were taking care of the student loans.

Little did I know, my mother never made one single payment on them. My student loans fell into default years and years ago.

When I worked, I gave them my tax papers and they took them to their accountant (supposedly), so I didn't even find out I wasn't getting any returns because they were being withheld. Naive me believed it when my parents told me that I just wasn't getting any money back this year from tax refunds.

Now, in April my mother suffered a complete mental breakdown. When this happened my father was out of town on business, and I ended up going to their townhouse to feed the family cat. While I was there I checked the mail, and found a collection letter about my student loans. Snooping around a little, I found a big bag of mail addressed to me at that address that had never been given to me, dating back for about 6 years.

So, it turns out that my student loans are in default. I had 23k in principal, now up to 35k with interest, and another 8k in collection fees/"penalties" for a total of 42k in debt. I make about ~20k a year at a call center, so this is a big deal for me.

So, I call the number for the collection agency: NCO Financial Systems. I explain my situation and say I want to repay the loans the best I can and get them out of default. They tell me that based on my type of loan it will take 9 monthly payments to get them out of default and eligible for deferment/consolidation/whatever and after 6 payments my eligibility for future student loans is restored.

So, then we start to talk about the size of these payments. They first ask for about $1100 a month, I tell them that's about my entire after-tax paycheck. So, they ask about how much my rent is, my living expenses. I'm on a fairly tight budget but I could probably spare a couple hundred dollars a month by working some overtime or cutting corners.

I am supposedly escalated up to people with more authority to lower the payment, but the lowest anybody will go is $478 a month, which is still ruinously large for me. They say that's their final offer, it's that or I'm in default on my loans for the rest of my life.

Well, I tell them I'd like to think about it and I'd like to repay it if possible. They say the can set up the payments tentatively and get confirmation from me later. I give them my banking information and say that if they get confirmation from me they will take it out on the 23rd of the month for the next 9 months.

Sure enough, a week later a letter shows up from them asking me to sign and return this statement agreeing to the terms of the repayment plan and acknowledging various things. The more I think of it, the more I realize I just plain couldn't afford it. I don't sign and return the letter, and my 3-year-old stepson has an accident with a juice bottle that ruins the part with the return address and phone number so I don't even really have the number to call them.

Well, the 23rd comes and goes without taking the money out. I figured I'll call them later and try to get a better deal. Then on the 29th I'm going to work and I check my bank balance. . .and a check cleared the bank that day for $478, which overdrafted me by several hundred dollars!

On my lunch break at work that day, I find out that they had produced a check with my name on it (but no signature) and deposited it. My Credit Union tells me that since the check is made to Pay to the Order of the United States Department of Education that they have to treat it as if it's a government lien and they can't reverse it or block it in the future.

My credit union tells me that their suggestion is that since my credit report is pretty good aside from the defaulted loans that if I apply they might loan me the money for the other 8 payments and then consolidate the loan with them.

I'm also considering calling the collection agency and pointing out I never signed their letter they were demanding and don't want them passing checks in my name and revoke any authorization they think they had. Then trying later to get a better deal. On the U.S. Dept. of Education web page about repaying defaulted loans they promise that rehabilitating defaulted loans is done with affordable payments. . .but almost half my take-home pay isn't affordable!

*sigh*, those Congressmen sure messed some folk's lives up royally when they made Student Loan debt totally unforgiveable in bankruptcy. I think with me it would have been a legitimate case.

Any advice?

unclewulf · #2 06-02-2008, 07:10 PM

OK.... To start with, I'm gonna move this to the Student Loan board. It should get more exposure there, and be seen by more expert members.

unclewulf · #3 06-02-2008, 07:29 PM

There... That's better.

Now, I'm not the student loan expert in these parts, but maybe I can help a little. First off, them taking $478 out of your account without authorization sounds wrong to me. NCO doesn't exactly have the most savory reputation, though, so I certainly believe it happened. collection agencies collecting on federal student loans are regulated pretty tightly by the government, so there may be something you can do about it.

Secondly, I think the size of the payments may be too much. I seem to recall reading that a 1% monthly payment was sufficient to rehab, as long as it's paid on time, consistently. Sorry, I don't remember where I read that, but I believe it was on a government site. Check this page, scroll down to 'Student Loan Rehabilitation.'

While you're at it, check the rest of the info that's linked to that page. Lotta good stuff there...

On consolidation [once you get rehabbed], check with the government for consolidation possibilities. Look at all the numbers, and compare them to what your CU is offering. You'll likely come out ahead with the government. Dunno about where you are, but here [Vermont], a private lender can't get within shouting distance of a government deal.

Now, all that should give you something to chew on until better help arrives. And rest assured, there is better help available, and it'll be along soon.

Best -

Wulf

SOAPLADY · #4 06-03-2008, 04:40 AM

The key phrase here is "They say the can set up the payments tentatively". You did not call to revoke the payment so even without a signature, you did in fact authorize the payment. The CA did nothing wrong.

Yes you are entitled to reasonable and affordable payments on your student loan. Payments will be based on your household income. You have to ask for it....they are not going to tell you about it. And you do not want your credit union refinaning your loan either. They sound like a bunch of idiots....a check drafted to the US DOE is not a lien and it COULD be stopped if it was unauthorized.

Lukeskywalker · #5 06-03-2008, 04:21 PM

Dear Soaplady,

You are so smart when it comes to "student loans" and the repayment/defaults thereof. I am very glad you are here. We need you.

Thanks,
Luke

#6 06-03-2008, 04:21 PM

Okay, so from your advice, my plan is as follows:

1. Call up NCO Financial Services, try to negotiate a lower payment. Simply put: I cannot afford $478, that's more than I pay in rent per month and is more than my paycheck some pay periods if there hasn't been a lot of work, and even 1% would be $436 a month which is still too high. Anything above $250 is really pushing it to be honest, and that's still making sacrifices on my part to afford it.

2. If they will not substantially cut my payment, go to my Credit Union about getting a loan for the amount of the 8 remaining payments, $3824, and use that money to tell NCO and the DOE to get bent.

3. If the credit union won't loan me the money, then call up NCO and tell them that unless they can lower the payments, the deal is off, revoked, rescinded ect. I see what check number they used (320) on the check they produced and from what I've been able to put together they are using that sequentially for their checks, and I'm going to put a stop on checks 321 through 328. The person I spoke to at one branch who said there was nothing they could do looked new and, frankly he looked intimidated by the fact it was a collection effort in any way involving the government. I'm thinking that if I go to the branch on campus (it's a University credit union), I'll get somebody a lot more experienced at dealing with things like this.

4. If I can either get substantially lowered payments or the money from my CU to pay the payments, I get my loans out of default and look to consolidate. I don't automatically go to the CU and see what kind of deal I can get from the gov. My Credit Union has been very good to me in the past regarding interest rates, getting me a rate on my credit card that beat the pants off of other banks, and gave my fiancee a rock-bottom rate on her car when she bought it, so I've learned to have a measure of trust in them as a lender.

SOAPLADY · #7 06-03-2008, 05:36 PM

For starters, you cannot call them with an attitude. You NEVER tell a government student loan CA or the DOE to get bent...you will find yourself immediately headed for a garnishment. At this point in time, with a government default on your credit report for such a high amount, you are unlikely to get an unsecured loan without paying thru the nose. With a garnishment you will not be able to consolidate, nor will you be able to rehab without making voluntary payments on top of the garnishment payments.

You need to call them up without an attitude and tell them that you wish to rehab your loan, but you need reasonable and affordable payments per the Higher Education Act. If they refuse, you calmly tell them that you will contact the student loan Ombudsman, informing them that you are being denied reasonable and affordable payments. You can excercise your rights without refusing payments.

Next year for your taxes, try Turbo Tax online. Easy peasy. [/left]

#8 06-03-2008, 06:13 PM

My apologies if I implied I would actually call them up and tell them off. I didn't actually mean to say I'd tell them off, I am just frustrated enough with the situation I want to give them what money I can and get on with my life.

Thanks for the information about citing the Higher Education Act and the Student Loan Ombudsman, I'll be sure to mention that if necessary. I really want to pay it off the best that I can, but what they are offering is just plain too high.

2nband · #9 06-03-2008, 06:35 PM

Try to work with them if you can! My brother is dealing with a garnishment of $200 per week for his student loan! No, he never called or anything like that, but he is now having major financial troubles considering his hours at his job have been cut from 40 to between 20 and 25 hours per week and there is talk of some people being laid off. Now on top of this, he has rent, child support, day care for the weeks he has his daughter (he and his ex have 50/50 custody and he is still paying child support), plus the IRS are garnishing his wages for taxes that he had taken money out of his 401K to pay when he had his own business that his wife at the time never sent in, and he also has a finance company that keeps calling my house from where he still owes a balance on a car that he let get repoed and was resold. He almost was evicted but was able to get some help from my parents. So best advice, work with these people if you can!!!

unclewulf · #10 06-03-2008, 07:38 PM

Soaplady, thank you for jumping into this. I just couldn't make the words flow at the time, and was really hoping you'd see this thread.

#11 09-12-2008, 05:08 PM

You have no idea how relieved I am that happened upon this blog!!!!!! I was looking for advice and you are in the EXACT same position I am in. I called about my student loans just yesterday and they told me WORD FOR WORD what they told you!!! I owe 70k and they said I could pay $820 monthly and when I said I COULDN'T afford that, I too, was directed to another special department. They said that I could pay $470 a month and that was the lowest I could go. I can't afford that either. Like you, I could probably be able to manage $250 a month. There has to be some resolution other than paying nearly $500 a month for the rest of my life. I know that I ultimately am responsible for the choices I have made, but I need to support my two young children. Please relay to me any more info that you get about the subject. Again, thank you and I wish you luck with the student loan folks.

SOAPLADY · #12 09-15-2008, 06:40 AM

Problem with paying even $250 per month on a $70k debt is that your interest alone is about $400 per month. With rehab $250 may be deemed affordable but based on your balance is not really reasonable. This does not make you a good candidate for rehab. Clear as mud right?

I would honestly suggest you pursue consolidation with the Direct Loan Program. You will automatically assigned to to the Income Contingent repayment plan . You will be stuck with both the negative tradelines of the default until the SOL for reporting runs out, but financially I think you will be better off.

#13 10-20-2008, 08:58 PM

I am in the same boat as most of you. I have one batch of student loans for $50k. They contacted me and told me I had to make a $1500 down payment to start the rehab. I had to make 9 payments of $320 dollars to get it out of default. After I completed that Edfund consolidated my loans with ACS and now my payments are $360 per month!

On top of this, I was contacted later about even more student loans that I owed on top of what I was already paying. I thought that all of my existing loans were included in the first situation. This new CA "ACT" were threatening me with wage garnishment over $23k until I sent them in a all of my income and expense info so they could determine a payment plan based on my disposable income. For some reason I thought they would be reasonable and the payments would be manageable since I already pay 360.00 on 50k. They want me to pay $705 per month or else they will garnish my wages!! I cannot afford that at all! All together I am to pay $1065.00 per month on student loans! That is more than my house and car payment combined!

Can the Direct Loan Program help me get this payment down to an affordable one?

SOAPLADY · #14 10-20-2008, 09:22 PM

CK... standard rehab payment of a $23k default is approx $230 per month. You are entitled to "reasonable and affordable payments". If they they refuse, and your budget including your other student loans wont allow it, simply tell them you will file a complaintwith the student loan ombudsman. They are going against the Higher Education Act.

#15 11-04-2008, 01:04 PM

I had 3 loans totaling a little over $7,000 I took out in 1987. When NCO began garnishing my pay in 2007 (yes, 20 years later), it was now on a total of $23,000 with payments at about $510 a month.