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Defaulted Loan during Peace Corps Service

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I am an RPCV who recently COSed after 3 years in the Peace Corps. I am currently still in Burkina Faso. In 2010, after one year of my Peace Corps service, I failed to mail in the renewal for deferment on a student loan from Direct Loans. Consequently, my loan went into default. A collections agency, ACT, contacted me through the Burkina Peace Corps office, demanding monthly installments that were higher than my monthly income and higher than the amount I was allowed to take out of my readjustment allowance for such purposes. After going back and forth with them several times from my village, they refused to accept the payments I was offering and I stopped contacting them.


I didn't hear from them again until I was waiting for the remaining 2/3 of my readjustment allowance during this past month. I had received the initial 1/3 after my first two years, and another 1/3 after my third year ended. Two weeks ago, my mother (her house is my home of record and all my correspondance is sent there) said that I received a letter from the collections agency, informing me that they had garnished my 2/3 readjustment allowance check to repay part of the loan I defaulted on.

I know collections agencies are allowed to garnish wages and income refund checks, and so I assume my readjustment allowance falls under this umbrella, but I thought I read somewhere that collections agencies can only take a percentage of your income and not all of it. I'm also not entirely sure who to contact to resolve this issue. I'm afraid to contact the collections agency again because they demand such ridiculous payments that I know I won't be able to make, especially now that they've taken this money from me and I need to get back on my feet after my Peace Corps service. Any suggestions you would have would be greatly appreciated.




Quote:

I know collections agencies are allowed to garnish wages and income refund checks, and so I assume my readjustment allowance falls under this umbrella, but I thought I read somewhere that collections agencies can only take a percentage of your income and not all of it. I'm also not entirely sure who to contact to resolve this issue. I'm afraid to contact the collections agency again because they demand such ridiculous payments that I know I won't be able to make, especially now that they've taken this money from me and I need to get back on my feet after my Peace Corps service. Any suggestions you would have would be greatly appreciated.
They are only permitted to garnish a % of wages...however your readjustment allowance is not considered wages and is subject to 100% garnishment. The collection agency didnt garnish your readjustment bonus...the department of ed did. They have the right to offset ANY federal payment.

You should have stayed on top of your deferments. Your mother would have received numerous letters warning you of the impending default....why was action not taken then?? What you need to do now is consolidate your loans with The Direct Loan Consolidation Program to get it out of default. You will find information in the sticky section at the top of this forum.

Sub: #1 posted on Mon, 10/22/2012 - 13:52

SOAPLADY SOAPLADY
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Yes, now that I'm reading more about this, I realize the difference. And that readjustment allowance falls into the same category as income tax returns, etc.

You're right, I should have stayed on top of my deferments better. It may not be a great excuse, but these things are hard to stay on top of when you live in a village in the middle of Africa. By the time I made it into our capital city (which I only did once every couple of months) where I could mail things and have internet access, it was too late and the loan had already defaulted.

Can I still consolidate my loan even though it has been sent to a collection agency?

Sub: #2 posted on Tue, 10/23/2012 - 01:50

Taabo1985 Taabo1985

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Quote:
Can I still consolidate my loan even though it has been sent to a collection agency?


Did you read the sticky at the top of the forum??


Was it not recommended that you leave financial power of attorney with someone in the US?? Also it takes 270 days for a loan to default...a full 9 months.... did your mother not tell you were getting calls/letters??

Sub: #3 posted on Tue, 10/23/2012 - 06:56

SOAPLADY SOAPLADY
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I was advised to sign Power of Attorney over to someone, and I signed it over to my mother, which unfortunately turned out to be a poor choice. She did receive correspondance, which she promptly threw in an unopened pile in my room for me to find two years later. She also received phone calls, which she failed to tell me about mostly because she responds to anyone asking for me with "She's in Africa" and hanging up. It wasn't until Peace Corps called me to tell me they were being hassled by a collections agency about some defaulted student loans that I knew how serious the situation was.

At the end of the day, I know that it is my responsability, which is why I'm trying to figure out how to rectify the situation. So thank you for your advice.

Sub: #4 posted on Tue, 10/23/2012 - 07:15

Taabo1985 Taabo1985

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What a sucky situation. I hope you get things back on track soon.

Sub: #5 posted on Tue, 10/23/2012 - 07:23

OhioGal1 OhioGal1
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