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Private Student loan default in error

Submitted by on Tue, 07/17/2012 - 22:24
Posts: 202330
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My husband is in Medical School overseas (Phillipines). He started at a school in Grenada but as a result of tuition increases he was forced to transfer. Following acceptance, with plane ticket in hand, he was notified that the school had lost it's FASA and we were forced to take out private student loans in order for him to continue. The school, while private, is under the jurisdiction of the Phillipine government and we struggled for months to get the paperwork indicating that he was a full-time student. We communicated with the AES--Great Lakes that manages (?) the loan for Key Bank; everyone told us it was fine--to submit the paperwork when we received it (which we did). As my husband was preparing for the next round of loans we received a denial from Sally Mae due to a "default" noted on our credit issued by Key Bank. When contacted they indicated that we owed them $1700/mos because we hadn't filed the paperwork. I contacted Great Lakes who had the paperwork, and it was available on line noting my husband's current enrollment. But, Key Bank has said they will review but because the loan is in "default" they aren't going to make any promises that anything will change--not what we owe currently/monthly or correction to our credit score/report. Can they do this?