American Education Services Student Loans with a Debt Collection Agency
I cosigned a student loan for my daughter with American Education Services, and she thought it was deferred until she graduated. Which just happened last year fall semester. I have been getting calls from MRS Associates saying the original creditor won’t deal with her or myself and it HAS to be handled by him.
He is demanding a full payment of $22,000+ and there is no way that this is gonna happen. First, I don’t believe in sending money to people who claim to be owed it with no written verification. I have been scammed too many times. Second, I don’t have any kind of money to repay that amount. My daughter has a new job working at a hospital now, and can make monthly or even weekly payments. This guy, Kevin Hendricks, is claiming that I have only the one option of full repayment or they will take legal action against me.
How do I handle this debt collector hired by American Educational Services? Is this guy for real?
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I’m very sorry to hear about the issues you’re having with AES and MRS Associates. No one should be treated in such a disrespectful manner by a debt collector. It’s unlikely that MRS is going to take legal action against you, because they do not appear to have any collection attorneys, or the ability to engage in legal collections from their description of services.
A private student loan lender can only take you to court through a collection attorney firm that is licensed in the state that you or your daughter live in. It appears MRS Associates is just making an empty threat. Debt collectors are prohibited from making certain types of deceptive statements and legal threats without basis, so you may want to consider talking to a Fair Debt Collection Practices Act (FDCPA) attorney in your state to see if the collector broke any laws by making those threats. If so, you may be entitled to damages and attorney’s fees. Many FDCPA attorneys will take these cases on a contingency basis and you will only have to pay them if they are successful.
With that said, this is the typical kind of tough talk that we often see from collection agencies who try to bully borrowers that do not have experience dealing with aggressive third party collectors. The majority of people who default on private loans are unable to pay the full balance, but apparently enough of them do pay the full balance after such threats that collectors will still try to ask for the full balance to be paid when they get a new account to collect on. For the vast majority of people, this is not realistic, and there are likely other options that the collector is not disclosing.
AES is Your Student Loan Servicer
One thing that will be important to determine before putting together a strategy to resolve this situation is figuring out who your original lender is. AES is just a loan servicer, and they mainly deal with private student loans. Most often, the lender they are servicing for is the National Collegiate Trust. MRS Associates is also a collection agency that National Collegiate Trust uses often, so I would bet that’s who your original lender is.
Because this collector is bullying you and taking advantage of your inexperience in dealing with this kind of situation, it may be less stressful for someone else to handle this for you rather than doing it on your own. In many cases, a professional negotiator can also negotiate a lower settlement than a borrower can, because of past experience and knowledge of lenders’ settlement guidelines and collection cycles. You will want to get any agreement in writing.
Some people feel safer sending payments by cashier’s check or money order with Priority mail and a return receipt. Some suggest it is not a good idea to give a third party collection agency your debit card number or bank information due to the massive amount of complaints against those agencies.
Settling with a Private Lender
“NCT” is an aggressive private lender, but there is often the possibility of settling with them or their collection agencies through extensive negotiations. If you’re not comfortable negotiating with MRS Associates yourself, or feel they aren’t taking you seriously, you may want to consider hiring a professional negotiator who has experience in dealing with private lenders like National Collegiate Trust.
I’ve done quite a few settlements with NCT, and have found them to be very difficult but ultimately willing to settle for between 40-60% of the balance in the right circumstances. We’ve been able to negotiate structured settlement terms with NCT of 2 years or longer, which makes settlement a much more affordable option than paying a lump sum settlement.
If settlement isn’t affordable even with structured terms, you can most likely get on to a payment plan but this will likely keep the account in a prolonged default/charge off status until the last payment has been made. Unlike federal loans, defaulted private loans will rarely become current again by making payments and will instead remain in a permanent charged off status until the account is paid off. It is faster and less expensive to negotiate a settlement, but it is more difficult since most lenders and loan collectors would rather take payments on the full balance than agree to a settlement.
This is the kind of situation I deal with on a regular basis, so if you’d like to chat further feel free to call the hot line at 800-939-8357, and press option 4, or respond below in the comments.
Anyone with questions or concerns about their student loans serviced by AES; loans placed with MRS Associates for collection; or trying to develop strategies to resolve loans with National Collegiate Trust, can post in the comments below for feedback.
About Andrew Weber C.S.L.C.Andrew Weber is a Certified Student Loan Counselor and Certified Credit Counselor through the N.A.C.C.C., and has been helping borrowers with a variety of federal and private student loan issues since 2012. A negotiator since 2009, he has negotiated settlements on unsecured debts, including many private student loans, in excess of 7 figures and climbing.
I have a private student loan in default from bankruptcy that’s discharged. I’m currently disabled but also my father has passed and he was the original borrower. Transworld Systems says I can’t discharge my loan due to disability or Death.
It’s true that there isn’t really much in the way of disability discharge for private student loans. It sounds like this is the National Collegiate Trust?
You may want to see if your BK attorney can reopen your BK and attempt a discharge with an Adversary Proceeding. If that doesn’t work, settlement of the loan your only real option.
I have automated payment and a loan in good standing with AES. I received a letter from Transworld Systems saying they now own my loan from National Collegiate. Talked to AES and no problem with my account and loan is still active with them. Why is Transworld sending me a letter then?
Unfortunately, we can only guess without having a direct conversation with Transworld. If this is an NCT loan (AES is just a servicer), they are known for making all kinds of mistakes. It wouldn’t hurt to give Transworld a call. If you’re not able to resolve it with one call, let us know in the comments here.
Greetings,
I have private student loans that have been on deferment until I finish my training. I wanted to settle and pay off my loans; however, I noticed that fees on the loans were unjustified. I am looking to seek professional help resolving this issue as I want to pay my loans in full. UAS Connect seems to be a third-party company that manages the loans I have borrowed from Coronado student loan trust GSED and Edinvest-AUA. UAS is very unprofessional and unresponsive and wanted a professional negotiator.
Hi IG. UAS is a common loan servicer for private student loans. The rule of thumb for private loans is – they will usually not negotiate any kind of relief, new terms, or settlement payoff unless the account is severely behind or in default. We typically settle these for about 50-60% of the balance when in default. If you’d like a full evaluation about the pros and cons of this approach, feel free to call the CRN hotline at 800-939-8357 and press Option 4.
Mr. Weber, I graduated college in 2004. Since then I have paid the amount I initially barrowed for school (roughly $45,000.) The interest however has left me with an outstanding balance of $40+k. I am 42, a mother of a 7-year old, with no retirement or savings. After COVID, summer of 2021, I filed Ch. 7 and was discharged that August. I have a new job I began Jan. 2022. I make decent money but with the balance of the student loan with Coronado Student Loan Trust / AES I don’t see how I’m to get ahead with my families financial future. I read some place: ‘serve to frustrate the “fresh start” of his Bankruptcy Discharge, and, as such, undermine the entire purpose of the Bankruptcy process.” With your knowledge and experience, how likely would they discharge my loan? I used up my forbearance right after school as my pay was not enough to handle the initial payments.
Hi Jessica, unfortunately there is no way to know the answer to your question. It depends greatly on the judge and how they interpret the rules governing student loan discharge in bankruptcy. I would recommend you reach out to a knowledgeable bankruptcy in your state who has experiencing with Adversary Proceedings for student loan discharge in BK. I’m not an attorney so I wouldn’t be able to provide this type of legal advice. My specialty is settling these types of loans for far less than the balance, but it still requires a significant amount of funds to do that.
My domestic partner is struggling with my private student loans. They were originally taken out between the years of 2004-2006 through Bank of America. At some point they have been taken over by NCT. The loans have always been serviced through AES (American Education Services). As of now longer able to afford the payments on these loans. Two documents that I have sent in to AES one is for a disaster forbearance to put the loan payments on pause and it was submitted in July still with no response from NCT, AES says it is still in processing. Another which is a letter explaining my current health condition, and no response since it was submitted in August- being told it is still in process. Have been under medical care unable to work since March. Over the years the payment has increased substantially on these loans. The current payment is almost $600/month. Thus far $46,029 have been paid off on the loans$28k in interest and $17k in principal. The original balance was $45176 and the current balance is $46198 with no end in sight. now threatening that the payment is going to go up again which doesn’t make sense since they say the rate is based on current interest rates and they are at an all-time low. It is unjust what they are doing, they are not willing to help and are threatening me and my 80yr cosigner who lives on a fixed income
Let me know what NCT and AES say about any assistance or forbearance options and lets go from there.
Hey, so I have a NCT AES loan from 2006, I have been paying it on time 2012-2018 and it has since been a lil spotty and now I have defaulted they sent me to a collection agency saying my balance is $23k ! Thats almost the amount I took out it’s insane… they want me two settle for $17 maybe down to $15 k for 24 months . I can’t afford that….I mean is this even legal this loan feels like a bad pay day loan with %100 interest any way i can get out of this or something…now my credit is going to be shot.
You can potentially settle for lower than that.
There have been some issues with NCT being able to collect on loans when challenged well after they sue you. There are some good attorneys you can connect with for help if that happens.
Getting to the point they sue you is obviously going to mean your credit stays depressed. Settling for less will allow that to start healing once completed, and would keep you out of court.
Good Morning
Hoping you can help. I am the co-signer on a AES loan. It has been a fight to get any information on this loan and have been paying on it for the past 12yrs with no end in sight. The originator on this loan refuses to make any payments or help in any way. The one time I did get information they advised me that this was not a student loan. I’m hoping you can give me some advised? how much does it cost (ball park) to get legal help on this?
Thank you,
-Hans
We had our email exchange on this yesterday Hans. Please post any follow up questions or concerns you may have to this comment thread.
I am currently repaying a private student loan through AES with lenders NCT and TOWD point trust, and I am wondering if there is anyway to negotiate a settlement for a lower student loan balance? I have 1/6 of the amount I owe in cash and would pay them off today if they would take that offer. I have had a very good record with on time payments, but my debt just keeps growing and I am afraid that I will never be able to pay it off if something isn’t arranged. Considering the climate we are in with the coronavirus, it might be the best I can do for a very long time. Do you think there is a chance at all that this could be negotiated?
You would have to be willing to fall behind with many payments and damage your credit before you could settle. It is highly unlikely you would settle for less than 20%, even with everything that is going on with COVID. You could probably get time to pay the settlement if you do not have a lump sum saved up though.
I agree with Michael. NCT and Towd Point Trusts are owned by some very savvy, if ethically questionable private equity companies. They are lawsuit machines on defaulted loans, and would have no incentive to take a settlement that low even if in default for a long period of time. They routinely sue after 1-2 years in default. Some private lenders are going slightly lower than usual on settlements, but for the most part I think they view this as a temporary problem so they are mostly offering more temporary options like forbearances, etc.
AES is your loan servicer, which tells me that the loan is current or at least not yet in default; as they are not involved after default takes place. The only time we can settle with these lenders is after loans have defaulted, and it takes a great deal of time and negotiating after that to get them down to the 50-60% range (depending on whether it’s a lump sum or structured arrangement), which is what we normally consider a good settlement on these type of accounts.
NCT has some well known issues with documenting their ownership of loans, especially on their older portfolios. So another option people sometimes take is waiting for NCT to sue them (approximately 1-2 years after default) and then hiring a student loan attorney to fight the case and get it dismissed or settle in court. This can be a time consuming and difficult process, although settling prior to litigation is also a time consuming and difficult process in it’s own right.
If you wanted to aim for a 55-60% structured settlement and use the amount you have as a down payment towards that, I’d be happy to help. Feel free to get in touch if you’d like a more detailed evaluation.
AES is the loan servicer for NCT. They have been demanding payment on this student loan and it doubled form the original amount. Can you help with this?
Hi Terri, yes I do settle these. You would have to be in default and we settle them for about 50-55% of the balance (lump sum). Structured settlements are also available but are slightly higher.
There are a lot of known issues with NCT loans so you could also wait for them to sue you (this will take about two years) and then have a student loan attorney challenge the loan’s validity in court by forcing them to provide bill of sale and chain of title documents.
Out of the blue I received a collection notice about a student loan. Original creditor Student Loan Express current creditor Coronado Student Loan Trust. I had all my student loans forgiven due to permanent disability. I can’t even remember what school I got this loan from I’m curious though. The good news is it states in this collection notice that because of the age of the debt they cannot sue me or report to any credit reporting agencies. So I guess I can just ignore it ?
If it is a private student loan, and it is passed the SOL to sue you, or to credit report, it is something I would ignore if it were me.
I would agree with Michael – keep an eye on it but no action seems necessary. Coronado Student Loan Trust is known to have some issues similar to National Collegiate Trust. But this will basically fade away in time and you already know that the most serious potential consequence, legal action, is not going to happen according to their disclosure.
AES is my servicer. EDMC was the original lender. Then they said Education Finance 1 llc. Was my lender. Both these companies no longer exist. EDMC was the main company and educate finance 1 was the subsidiary company. They went bankrupt and liquidated all assets. Dream Center bought out EDMC. However, my loans never transferred over. AES tried telling me and still do, that Loan Science is the lender. They are a 3rd party debt collector and own 1% of what EDMC was worth at the end. That was an estimated $0 to $50,000. Now as of this evening I received a “new” privacy policy, stating I have. New lender by the name of Coronado student loan trust. I pulled up information on them, and they are just as bad as all the other options from AES. it looks as though the lawsuits are claiming exactly what I am going through and these people won. And Coronado is a sham. AES still claims that EDMC owns my loans and that until they notify AES of their closure I owe them money.
Hi Ashley, this sounds like a pretty complex issue that we see sometimes when private loans are bought and sold repeatedly. I would recommend hiring a good student loan attorney who is licensed in your state to look into this as it does appear to be a legal issue, especially since you’ve uncovered similar issues to what you’re going through in lawsuits filed by other borrowers.
Hi, I have one $46k loan with NCT that I defaulted on two years ago. It now sits with Simm Associates for collections and they’re threating legal action if I don’t settle this month (October). They are offering to settle for $23k, which sounds nice (if I can come up with the money) but I’ve heard that debt settlements are detrimental to credit, although my credit has already taken a significant hit since I defaulted.
Do you recommend I accept their settlement offer? Is Simm Associates qualified to take legal action or is this an empty threat
A paid collection is going to help you move on and accomplish credit and finance goals, where an unpaid one will prevent it.
If your motivation is to move on with your credit life, and eliminate the risk of being sued, and you have the resources to put this behind you, I would.
I signed up for autopay and payments are withdrawn monthly, and AES reported me 90 days late
Have you called AES? You could also dispute this with the three major credit bureaus – Equifax, Transunion, and Experian.
I paid off my student loan in 2015 and now EAS are trying to make me pay the same loan all over again.
It’s really difficult for us to offer any insight on this type of situation without much more information. Do you have records of the payoff? Are you sure they aren’t contacting you about a different loan? Sometimes there are multiple disbursements with similar balances which can be confusing. Feel free to provide more information in a reply and we can try to help.
I have one loan in default because of a few missed payments. It’s hard making payments to them when you only make so much a month/year. I got a call from National Enterprise Systems and I called AES. They said they turned my loan over to Transworld Systems and I honestly don’t even know where to start or who to pay. The tone of the rep from NES made it sound as if I were going to have to appear in court or something since she kept talking about “settlements” and such. They wanted me to pay them the entire balance of the loan or 11k which I do not have! I’m afraid that if I do begin a payment plan, that I will never fully pay it off.
Hi Sherelle, it sounds like this is a National Collegiate Trust private loan. AES services them when they are current, and collection agencies handle them when they are in default.
A settlement normally refers to a reduced payoff amount that is negotiated outside of court, although they can be negotiated during lawsuits also. But in the debt industry a settlement is usually referring to an agreement reached between the creditor and the borrower prior to litigation.
NCT is legally aggressive and eventually your account probably will go to a collection attorney.
It sounds like NES or Transworld is currently assigned as the debt collector. I would need more info to do a full evaluation such as the loan balance, what you can afford, etc. If you cannot afford to settle (settlements are typically 50-55% lump sum, or 55-60% structured over 2 years); then you have two main options.
The first option would be to do a good faith payment plan which seems to prevent NCT from moving further with legal action (although this is not a guarantee; it just seems to be a trend).
The other option would be to take a “wait and see” approach, and be prepared to hire an attorney to defend the lawsuit. NCT will sue on even small balances eventually, if no payment plan or settlement is reached with the other non legal agencies like NES or Transworld. A good student loan attorney may even be able to beat them in court, because NCT is not always able to provide all of the documents that prove they own the loan. However, they have gotten better at defending these types of cases from what I have heard.
So you have 3 main options in total – settle for less than the full balance (this requires a source of settlement funds for a lump sum settlement or a down payment on a structured settlement), enter into a payment plan or a “good faith” payment plan to try to hold off legal action (this is unlikely to pay the loan down or off any time soon); or – take a wait and see approach while being fully prepared to hire an attorney as they eventually will try to sue if nothing is done.
I had called AES several times in 2007 to see if I qualified for for Teacher Loan forgiveness. I was told that I had to pay for 10 more years since my loans were prior to 1998. I called AES in 2018 to start the process and was told that I didn’t qualify because I had some private loans. I called them several times in 2007 to make sure that I would qualify and I was told me that I would qualify. No on told me that I need to consolidate now I have to pay another 10 years.
It’s true that private loans don’t qualify for TLF. I would check the NSLDS database at http://www.nslds.ed.gov to find out for sure if they are private or federal (only federal will show up there). AES is mostly just a servicer for private student loans. Do you know who your lender is?
Consolidating through Direct Consolidation only works for certain types of federal loans to make them eligible for different federal programs. Going through an outside refinance/consolidation will not make private loans qualify for any federal programs, and private loans can’t go through federal Direct Consolidation. If you feel that they’ve given you bad advice I would recommend filing some complaints with the CFPB and your state attorney general.
I have 2 private student loans that are in default and they started garnishing my wages. What can I do at this point to make them stop garnishing my wages.
For a private student loan lender to garnish your wages, the loans must have defaulted, been assigned to a debt collection attorney who filed a lawsuit; and no response made to the lawsuit filing which resulted in the attorney collection firm obtaining a “default judgment” – which they then executed in the form of wage garnishment. You will need to hire an experienced student loan defense attorney that is licensed in your state to stop the garnishment and work out a settlement or a payment plan.
I would contact an attorney like Andrew suggested in order to resolve the underlying judgment issue.
If the wage garnishment is causing an undue hardship, such as the inability to cover basic bills, you can contact the court and find out how to contest the garnishment. You may qualify for partial or full exemption from the garnishment.
I have a question not sure if you can help I live In PA I am co signer on my daughters student loan (2008) she has 2 half payments taken out automatically every month which aes set up. Payments are always taken out by aes before the 20th of every month. I get a phone call every month three to four times in the month. Is there any way to stop these calls? they are receiving payments that they set up. I am just getting very angry with them.
I would talk to AES and get the calls to stop. If you have already asked them to do that I would file a debt collection complaint with the CFPB against AES and that should get your issue in front of the right person at AES to make the correction.
Watch this video about why filing a complaint with the CFPB can produce the needed result.
Hello- I have been paying on my loan for 10 years now monthly. It is still out of control. In the beginning they illegally added 18% ($11,300.00) to my principal amount. This was after completing all of their paperwork and multiple calls to get a hardship deferment. Once I had a job I started paying. In addition AES has charged me interest even when deployed to hostile fire zones with a deferment. I am looking for legal consul and would like to settle. I have spoken with Ombudsman, and AES they are sending me a write up of all the financials. Do you have a next step suggestion. FYI, the military has also made big payments on my behalf yet the mount owed is still staggering due top their terrible policies. Thank you for any assistance.
Call in to 800-939-8357 and press 4 for student loan help Jeffrey. Andrew will be able to help you get a bead on your settlement scenarios.
Please post an update with what the student loan Ombudsman is able to help you with. That is good information for people wondering whether they should contact that office.
Hi Jeffrey, this sounds like a federal loan. If that’s the case, I wouldn’t be able to help – federal loans rarely settle for much of a reduction.
The fees that were added sound like the default collection fee added to federal loans when they go into default. As far as I’m aware, it is legal for them to do that, although it’s a a very problematic practice.
Your main options with federal loans are to apply for different payment plans related to your income. Some of these payment plans also have limits on the amount of interest that can accrue. I don’t provide federal loan counseling, but I can refer you to a third party nonprofit that does. However, all federal repayment plans are free to apply for at studentloans.gov.
If your school declared bankruptcy, you may also want to try the Defense To Repayment process, but you may need a knowledgeable student loan attorney in your state to assist with that.
Hi Jeffrey, I would also add that charging interest on a deferment while you’re on active duty could be a violation of the Service Members Civil Relief Act. You may want to talk to an attorney who is experieced in those areas. There are several websites if you google the Act that have directories of different attorneys that can help.
Hello,
I currently have a loan through American Education Services for the silver state helicopter bankruptcy case in 2009. I only received my private license, which I cannot do anything with so I went back to school and received my bachelors degree. I originally owed $32,000 from the case but with interest and deferment while obtaining my degree, it is up to $47,000. I was wondering if there is any chance that AES will settle with a reduced lump sum payment? Any advice would be helpful. Thanks you
Call in and connect with Andrew to go over the details Joshua. You can reach him at 800-939-8357 ext 4.
Hi Joshua, AES is a servicer and private lenders won’t settle when accounts are current (AES only services current loans). Do you know who the actual lender is, and if these are private student loans?
I have tried for 4 months to try to negotiate a settlement with AES, I believe Citizens Bank backed the loan. I was first told the loan was only defaulted a month and I should wait for a few more months if I wanted to negotiate. It is my sisters loan…who I could care less about but she somehow got my mom to cosign the loan and my mom has had cancer and went through chemo and radiation. She survived but doesn’t have all her mind back and doesn’t even remember cosigning the loan…I don’t even know if she actually did. However, my mom wouldn’t press charges even if she signed my mom’s name so no use going there. Now the loan is defaulted 169 days at 5% and I sent a fax in asking for negotiation and was refused. My dad just died and my mom has half her income and I have a power of attorney to help her make decisions. How the heck do I get them to negotiate so I can use my disability savings to get rid of this. My mom doesn’t need this mess and I just can’t stand how they treat people.
Call in for a consult with a student loan counselor Sheryl. You can reach us at 800-939-8357, ext 4. You will be able to better determine what you are up against after speaking with Andrew.
Hi Sheryl, the loan is delinquent but not yet defaulted – that occurs at 180 days past due. Citizens Bank may continue to be difficult to negotiate with after the default occurs, especially if it’s your first time trying to negotiate a settlement.
Feel free to call the hotline Michael mentioned if you’d like to go over your situation further. It can be less stressful to hire a professional instead of attempting private loan negotiation on your own, and in many cases, I’ve been able to negotiate a better deal than what my clients have been able to get on their own.
Hi Andrew,
I am facing a slightly different situation but problems with most of the same players.
My cosigner on a private loan filed Chapter 13 bankruptcy without telling me in Nov 2011.
This loan originated 7/2007 with KeyBank, I graduated May 2011, accrued interest capitalized Oct 2011, and my first payment was due to servicer AES and made Dec 2011. The loan was transferred to a Guarantor 1/3/2012.
Sometime between 7/2007 and 7/2012 the loan was transferred by KeyBank to National Collegiate Trust (NCT). I am still researching when this occurred.
As of my 7/5/2012 TransUnion credit report the account was still under “Satisfactory Accounts” under AES/NCT with Payment Status “Paid or Paying as Agreed with last payment received 1/3/2012.”
I was tipped off to the problem with the account when I pulled my 10/15/2012 Experian credit report. Then it was listed under “Potentially Negative Items or Items for further review” under American Education Services with Status “Claim filed with government/Never late” Status details said “Scheduled to continue on record until Dec 2018” Date of Status 01/2012 and Creditor’s Statement “transferred to recovery”. Payment histories are all “OK” from 08/2007 through 12/2011 and change to “G” for 01/2012 (nothing after).
The balance history on both accounts (a second AES/Keybank loan originated 2/08 and is still in good standing) show that I was making the full payment for both accounts starting 12/5/2011 through 11/5/2012, with ONLY the Dec 2011 payment being applied correctly to both loan accounts. All consolidated payments from Jan 2012 through Nov 2012 were applied (as overpayment) to my remaining AES/Keybank-02-08 loan. At this point because of the Chapter 13 status, I was unable to view any accounts online and did not receive statements to verify how payments were applied.
I brought this to the attention of my cosigner’s lawyer who responded by telling us that “my cosigned loans should not be affected by the Chapter 13 case.”
I was not behind on any payments. All loans were current and payments made on time and in full. A single consolidated payment should have been applied to the 2 loan accounts serviced by AES.
I spoke with AES in Jan 2016 before the cosigner’s bankruptcy case completed and requested that they consider reversing the chargeoff. They responded by saying they were only the servicer and not the lender so they could not change any decisions. AES said when the bankruptcy was filed it gave the lenders the option and this lender “chose to allow the account to go into default.”.
I don’t see how AES can take a payment and apply it to another loan, nor how the lender can charge off the account without giving me notice.
What options do I have to return this loan to good standing and get my otherwise flawless credit back to where it should be?
Is there a possibility the lender could call it back from the collection agency (AES gave me the name “TSI” TransWorld Solutions), reverse the payments and reapply the payments to this one?
Thanks for your thoughts!
Hi Jason, your loans do sound like they are private except for one thing you mentioned – “government claim” as a notation on your credit report. That is a notation that only occurs with defaulted federal loans. Is it possible that you have both federal and private loans that were serviced by the same servicer?
To get some clarity, I would recommend logging into the student loan database at http://www.nslds.ed.gov and see if anything shows up. Only federal loans would show up there. You will need to create an FSA ID to log into the NSLDS database, if you don’t already have one (you can do that on the same site).
The rest of your description sounds like a “textbook” description of a defaulted NCT private loan, but that “government claim” notation has got me puzzled, if it’s associated with the same cosigned loan.
In my experience, a cosigner entering a private loan into bankruptcy will absolutely affect the original borrower – it has the same effect as if the original borrower declared bankruptcy. It sounds like your cosigners’ attorney may not be very well versed in private student loans.. not many of them are. Unfortunately, I have heard of other problems with private loans being entered into bankruptcy by BK attorneys who did not fully understand the underlying issues that are specific to private student loans.
AES is correct that they are just the servicer, and are mainly a glorified payment processor for private student lenders. It sounds like NCT owns the loans now and bought them from Keybank. The National Collegiate Trust is just that – a trust fund. They are owned by a company called “Turnstile Capital Management”, which is owned by “Goal Structured Solutions”. Good thing that’s not confusing at all, right?
To make matters worse, NCT doesn’t have even their own website for borrowers trying to contact them or get more info, and it takes a little research to figure out that they are actually a trust fund owned by TCM and GSS.
You would probably have to call TCM or GSS to try to get them to reverse the charge off on the NCT account. However, it is a common practice for private lenders to auto-default loans when they are entered in bankruptcy, so it may not be something that is reversible. And TCM/GSS/NCT is one of the most ruthless private loan holders in the entire industry and are not known for being helpful with borrower issues.
I think it would be extremely difficult to have the lender undo what has already been done and reapply the payments while reversing the default. You might possibly be able to get it fixed by filing a complaint with the CFPB, but it is a very long shot. I’ve found it much easier to work with the options at hand going forward, rather than trying to get a lender to go back and fix previous events that have happened on the account.
From their perspective, they auto-defaulted an account because it was entered into bankruptcy, so they will claim that they’ve done nothing wrong. It’s a brutal tactic, even more so because you did not know that the loans were entered into BK, but it is a legal tactic and is pretty widespread in the private student loan industry.
The silver lining here is that you may be able to settle the account for 50-60% of the balance. The fastest way to fix the issue may just be to do that, get a major reduction, and begin the process of healing your credit by having the charge-off notation updated to show a “paid for less than the full balance” notation.
Settlement will also greatly improve your Debt to Income and Debt to Credit Ratios. NCT and Transworld are very difficult to negotiate with, but I have been able to regularly get settlements at 50% of the current balance after months of negotiating on defaulted accounts. In my previous negotiations with Transworld, I’ve talked to at least 10 different agents there and have also negotiated settlements with their director of operations. These types of contacts are an advantage professional negotiators have over someone trying it on their own for the first time; in addition to past experience and knowledge of the lenders’ collection cycle. There are a lot of pitfalls to avoid, and it’s also just as much of a task to properly execute a settlement as it is to negotiate the dollar amount.
You will probably want to get started on this sooner than later, regardless of whether you hire a professional debt negotiator or attempt to do it on your own. NCT is known to sue within 12 months of a default occurring, and there’s a limited window to negotiate a good settlement. They will hardball for months at first, and it’s an incremental process as far as negotiation success.
If they do try to take you to court, a knowledgeable attorney (who has experience dealing with private loans and NCT in particular) may also be able to negotiate a settlement or even have the lawsuit dismissed due to lack of standing. This has been a problem for NCT since they have not always been able to provide full documentation of the accounts they own, since they largely buy their private loan portfolios from other lenders and don’t originate loans by themselves. It may be easier to settle before legal action instead of getting into a prolonged battle and hiring a private loan attorney, and if you’d like to take that route, feel free to call the CRN Debt Relief Hotline at 800-939-8357 and press option 4 to be connected to me for a free consultation.
If you’re going to try to dispute it and work backwards through the account history, you’re going to be in for quite an uphill battle, but a CFPB complaint is probably the only shot at getting something like that fixed.. since the lender will claim they did not make an error and treated the account like all other accounts that are entered into BK (even though you were not informed of this by the cosigner).
I’d also recommend checking the NSLDS as a precaution, since it really doesn’t make sense to me why a “government claim” notation would be showing on a defaulted private loan – unless it was a credit reporting error. A defaulted private loan should show that it’s “charged off” on the credit report.
Hope this helps!
To clarify my comment about NCT pursuing legal action within one year of default – in my experience, for accounts coming out of bankruptcy this would be within one year that the account is out of bankruptcy, if it was auto-defaulted. The “automatic stay” provision protects against any legal action while the accounts are still entered in the bankruptcy.