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BEWARE...Direct Loan Dept. of Ed. consolidation

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I was in the process of consolidating my loans, and, was foolishly under the impression that they would base your loan payments according to your adjusted gross income. This is not true....beware....if you are in default and consolidate with them....your payments will be figured on your entire gross yearly income with no consideration whatsoever for any other payments you have....including your home, car, medical, utilities, groceries or anything.

I was led to believe that they would base the payments on what we could afford after our normal living expenses....this is not true....after several phone calls to them....I got the real truth....they do not consider any of your living expensives.....strictly gross income!!

I myself decided to contact The National Consumer Advocate and locate an attorney. I have listed the link below.

I believe you will also find a link there to help them in lobbying congress fighting the unfair and unjust practices that are currently taking place concerning Student Loan issues!!!

There is a list there for Attorneys listed in each state that are advocates and have experience in fighting unfair, ridiculous and impossible Student loan payback practices!!!

jgurl, I don't have any ideas on student loan issues. This is something I always found hard to understand. Fortunately, I never took student loan otherwise I would have surely messed everything.

Soaplady has very good advice on student loan issues. She will come soon and put a comment. You can discuss all your queries with her freely.

Sub: #1 posted on Tue, 04/10/2007 - 12:37

BuildingWealth BuildingWealth

(Posts: 492 | Credits: )

The ICR plan is the most flexible plan offered by any lender. There are a lot of times that people under the ICR plan cannot afford the assigned payment....Direct Loans will work with individuals in setting an affordable payment. To the OP....getting an attorney is a total waste of time and effort. Did you actually talk to the DL reps to explain your payment? If your payment was not affordable, did you ask for a lower payment?? They will look at your expenses and providing they are reasonable, they will lower your payment.

Right off the Direct Loan site.

[quote]Income Contingent Repayment
This plan gives you the flexibility to meet your Direct Loan obligations without causing undue financial hardship. Each year, your monthly payments will be calculated on the basis of your adjusted gross income (AGI, plus your spouse's income if you're married), family size, and the total amount of your Direct Loans. Under the ICR plan you will pay each month the lesser of:

the amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income, or
your monthly discretionary income* multiplied by 20%.
If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate but will no longer be capitalized.

The maximum repayment period is 25 years. If you make payments under the standard or 12-year extended plan and then switch to the ICR plan, time under the former plan counts toward your 25-year repayment period. Time spent in other plans or in deferment or forbearance does not count toward the 25 years. If you haven't fully repaid your loans after 25 years under this plan, the unpaid portion will be discharged. You will, however, have to pay taxes on the amount that is discharged.

Sub: #2 posted on Tue, 04/10/2007 - 12:47

Moderators Cum Industry Expert
(Posts: 17271 | Credits: )

Yes I spoke directly with Direct Loans. And I was told that my payments would be based completly on gross income only.....not adjusted income. Even though the paper work they sent me has Income Contingent checked. I am 50 and my husband is 60 and we have no dependents living at home. Paying almost $500 dollars a month for 25 yrs. is really not much of an option for us. I will be in a nursing home if not dead and my husband probably will be dead by then. I owe the debt and I want to pay it..and pay it in I am going with an Attorney who is an advocate for fair student loan practices.....and try to get a payment plan that will allow us to make payments according to an adjusted income for living expenses.

Sub: #3 posted on Tue, 04/10/2007 - 13:12

Moondanzer Moondanzer

(Posts: 361 | Credits: )

I did not mean to sound snappy....I really do appreciate you responding. I just wanted to say thank you very much. But I do also believe that some things apparently are getting mishandled for some poeple. Because I have read the info you posted and once again spoke with DL....and they still say that my payment will be based on groos income and not adjusted. Also daughter who just recieved her PHD and will be hooded next month just consolidated with Sallie Mae. And they too based her payments soley on gross income with no consideration for any cost of living adjustments....and all of her loans were current. By the time she completes payment it will cost her $190,000. so I just don't know...but I think things are in serious shape!

Sub: #4 posted on Tue, 04/10/2007 - 13:53

Moondanzer Moondanzer

(Posts: 361 | Credits: )

Sallie Mae is a FFELP consolidator. They do not nor do they have any obligation to offer income contingent repayment. They do income sensitive but not income contingent. Only Direct Loans has this program.

Sub: #5 posted on Tue, 04/10/2007 - 18:12

Moderators Cum Industry Expert
(Posts: 17271 | Credits: )

I too was always leary of Sallie Mae but unfortunately Sallie Mae bought all of her loans and she consolidated with them because she wanted to get started in her career and do the right thing. I would never consider Sallie Mae for anything and I was lucky enough that they only took over 1 of my loans.

The only thing I am expressing here is to be very careful about believing everything you read on the web or, in a letter sent to you, or, by the person calling you on the phone.. Just because it is printed on a document or a website does not always make it so anymore. Unfortunately with the new supreme court rulings and President Bush's wonderful endorsement and support for Sandra Day O'Oconner a lot of things are changing and much of the thousands of printed paper promises and rules have not have time to catch up.

This is how I figure can send $100 a month for 25 yrs. and then be forgiven for the remaining amount. Or, you can seek legal advice and consultation and possibly actually pay off your original debt.

Sub: #6 posted on Tue, 04/10/2007 - 19:10

Moondanzer Moondanzer

(Posts: 361 | Credits: )

This is how I figure can send $100 a month for 25 yrs. and then be forgiven for the remaining amount. Or, you can seek legal advice and consultation and possibly actually pay off your original debt.

You can send $100/month but if it is not what your actual payment is set at, you will default in short order. Tack on another 18.5% in collection costs and another 7 years of damage to your credit.

Seeking legal advise is absolutely a waste of time and money. You signed a promissory note when you originally borrowed the funds and a new note would have been signed for the consolidation. The information on ICR has been the same for least as far back as when I was collecting in 1994.

Speaking as a former Financial Aid officer, student loans are a means to get an education. Signing on the dotted line obligates you to repay it according to the terms set forth. It really is no different than a car loan or a mortgage and you cannot expect then to cater to you. Think about many other loans will pay your interest while you are in school, give you a grace period, allow you to defer your payments to stay home to have children, or periods of unemployment. Trying getting your Visa card to give you those types of terms.

Secondary education (unfortunately) is not a right, but more of a privelege. The government assist those who cannot afford it but in turn you have to pay it back according to their terms, not yours. It is the taxpayer that paid for your schooling.

Sub: #7 posted on Tue, 04/10/2007 - 19:38

Moderators Cum Industry Expert
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We are also taxpayers...until I became sick I have worked since I was 14 yrs. old. I also raised 2 daughters....a Professor and an it's not like I exactly wasted my time!! And I am stating that I do want to pay back my debt. All I am saying is that instead of signing on the dotted line listening to financial advisors of colleges that want the money or others who make thier living dispesing these loans.....I will seek a little protection from a party who is not making their living dispesing these loans.

I realize that it really bothers you that I prefer to seek legal advice. But, there's always 2 sides to everything and you seem to think that the Gov. is 100% full proof. Well...I don't trust them so much anymore...a lot of things have changed since 1994!

And I think it's only fair that that some poeple also understand that to seek legal advice is not stupid or a waste of time. I wish I had of done it 7 yrs. ago...I could have saved about $35,000.

Sub: #8 posted on Tue, 04/10/2007 - 21:01

Moondanzer Moondanzer

(Posts: 361 | Credits: )

I also am not trying to get out of paying my debt....I simply wish to have a fair and reasonable payment arrangement! You are the one advising popeple to pay $100 a month for 25 yrs. and then the rest will be forgiven. Guess what...that's my tax money paying for that!!! So don't insiuate that I am trying to cheat the tax payer......I am just trying to resist what has and is quickly becoming a system that simply makes it impossible for poeple to pay off their original loans!!!!

Sub: #9 posted on Tue, 04/10/2007 - 21:09

Moondanzer Moondanzer

(Posts: 361 | Credits: )

Moondanzer, sorry you think that SOAPLADY's posts are erroneous or whatever, but the advice she gives is solid (and current).

What you need to understand is that just because a payment is reasonable to you, does not mean you will be able to convince a CA that it is reasonable.

Last comment, about the government...federal student loans are not the animal they used to be. You can no longer discharge them under bankruptcy (except by jumping a huge hurdle), your income tax refunds can be intercepted to pay them, and if you recieve social security, it can be garnished for it.

If you pay for an attorney, and he/she isn't able to help you, will you get a refund to apply to your SL's?

Well, whatever. Good luck.

Sub: #10 posted on Wed, 04/11/2007 - 00:13

Morningstar Morningstar

(Posts: 1634 | Credits: )

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