First time at a Collection Agency

Okay, so back in October of 2008 I had a medical test done without insurance that cost me something in the area of $2400 (not including random other smaller bills associated with it, but I paid all of those). When I got the bill I called the hospital and told them that I was a poor college student that only worked part time and paid for my car/rent/other bills and could not afford that. They sent me some application for financial aid, I filled it out and forgot about it. A month later I got another bill, so I called and explained, they said they never got the mail, got another application, filled it out, got another bill after a month.

I did this every month, and I even paid to PROVE that they got the mail once and delivered the application twice in person. Sometime around October I had to go to the ER and received another bill for $1200, putting the total now up to $3600. I fought more with the hospital up until December of 2009 when the hospital sent my bill to a collection agency because of the amount of time that had passed (I assume).

The CA is Accounts Recovery Bureau. When the collection agency called me in January I told them the story and they said they'd send me the hospital's financial aid application and get it settled. I never got it, but in February I got a bill from them, so I called. Same thing happened but they had me answer a bunch of questions about how much money I make. In hindsight I probably shouldn't have answered these questions, but I honestly thought they were part of the hospital at the time and that they were trying to help me.

I didn't hear from them in March, but last Friday I got a phone call from them. The guy that talked to me told me the following:

-The guy claimed that my "financial profile" states that I can afford $300 a month. In reality, after all bills/food I can afford like $25-50.

-I can only get a discounted price If I pay it in full ($2900).

-He told me that the $2900 discounted price is the lowest they could go and that he had never seen the hospital go lower and that is all his supervisor would approve. (Which all sounded like B.S.)

-If I setup a payment arrangement I have to pay the entire balance, no discounts. I have to come up with $500 in the next month (but he'd be willing to accept $250 this month, $250 next) before I can setup a payment arrangement.

-If I don't pay the first $250 he'll send the bill to my credit report and prevent me from getting a house or a car for a while because of the negative mark.

-AND! I have until Monday to call him to setup the date of my first payment before he sends it to my credit report.

So, how much of that is a lie (I've been told parts of that are illegal by a coworker?), and what can I do about this bill? When I call on Monday what do I tell these guys? Honestly there is NO way I can pay all of this bill. I've been told to ask about a Debt Validation, but hasn't it been too long for that? Has anyone else had to deal with Accounts Recovery Bureau? I've read some stuff online that really scares me about this group!

Also, I am in the process of getting a house with my girlfriend and want to keep this off of my credit until at least July (as far as I know, it is NOT on my credit report as of now - at least the mortgage people haven't mentioned it).

HELP!!!

Edit: Not sure if it matters, but I live in Indiana