Federal Direct Student Loan in Default. Can I get settlement from Dept. of Ed., or rehabilitate?
I have a (1) Federal Direct Student Loan it went into default in 1986. It has been in default ever since. There have been no payments made to it nor has it been in any type of forebearence or deferrement. The original loan was for around $7000.00 with interest it now stands at about $17,000. I want to get this out of my life. I have been trying to get information on Debt Settlements I understand that they can take a settlement @ 30%, 50% or 90% of the total acrued interest plus priciple. I have also read that they can rehabilitate the loan at PRE-DEFAULT status if I make 9 payments on time. Acrued interest and collections fees waived.
What would be the best course of action for pursueing a SETTLEMENT, should I go to the CA or directly to the Dept. of ED?. Is the Rehabilitation scenario I described above true or not?
—Shawn
Settling federal government backed student loan debts with the collection agency that the loan is placed with makes a surprising amount of sense. The collector and agency owner is often working on a contingency. This would mean getting paid, or paid better, only when resolving loans. This can make the student loan collector your advocate when settling.
Settling Federally Backed Student Loans
What you know and commented about options and amounts that can be written down when settling fed owned student loan debts, rather than rehabbing, is what I know too. With the Federal Loans, the settlement benefit comes from forgiving fees, interest and penalties – not principal forgiveness.
By working directly with the collector for the Department of Education you have someone whose interests are aligned… somewhat. Some variables may be the collector’s experience.
You should be prepared to discuss some personal financial information, and even provide documentation, to the CA representative.
Rehabilitating Federal Student Loans
You have far better options for rehabbing your federal loans than those who have private student loans. Not only do you have the benefit of rehabilitating payments that can have a positive impact on interest and penalty reduction, once a gov backed student loan debt is rehabbed, you can also gain some credit reporting benefits. With a loan in default as long as yours, the credit reporting benefits of loan rehab may not mean much, but I do want to point this out for any future readers.
Once federally owned loan is brought out of default you can then also qualify for income based repayment options and also seek additional government loan products.
Anyone with federal loans in default, or that are unaffordable, will benefit from watching this recent interview I did with Andrew Weber.
Andrew responds to reader questions and concerns in the comments below.
Anyone with questions or concerns about their federal student loans can post in the comments below for feedback. You can also call in for a consult at 800-939-8357, and choose the options for student loans that applies to you.
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
Sounds like I struck a cord. Why don’t you send me your information @ECMC and you can look it up in your own system and see where you charged 3x’s. good luck with the cat fish shell game. What did you mean by “show us” – who is “US”. Someday you will pay by your mistakes too – remember that “Lynn C” from “Canada”
Lynn C.,
Why must you be so condescending and be so matter of fact that ALL collectors inform all the ignoramuses (your views just stated differently) that defaulted on their student loans for reasons unbeknownst to you. Because you memorized your promissory notes A+ to you where others had failed that course, an F, No it’s not extortion to pay 600%-800% of the initial loan. Perfectly legal and perfectly fair are 2 different things here. I get why all on here are saying you have no empathy or compassion because you’ve shown you have none, zilch. Have you ever settled with anyone…less commissions for you right? Please just “educate” us stupid defaulted fools and not belittle us please! YOU belittle people. YOU are condescending. YOU are not better than us!!!!!
Good luck John. I empathize with your predicament and all others who are trying to pay off their student loans. You are probably on the hook for the rest of your lives and no-one cares, especially the current administration. My granddaughter is in somewhat the same situation; however, I am her grandmother and am taking care of these loans for her. Believe me–It is a full time job!! There is NO WAY she could ever find the time to deal with the foolishness surrounding the collection of these loans. The collection charges would be laughable if they weren’t so devastating. I am old and in good health, but I will be paying on these loans for the rest of my life and then when I die, there may be enough to pay them off. Meanwhile, our economy is in the toilet and jobs are scarce to none, so how are all you young people ever going to buy houses, cars or anything else to rescue our country in its final throes of disintegration? God Bless America, my ass!!
I would like to say this. Most people are unaware of income based repayment. I talked to the department of education in the early stages when I saw I was disabled and unable to work. No one told me of income based. I had no income at all and could have paid zero without defaulting and no one advised me and back in the 80s there was no internet to google info. Most people do not still know this is available. I told them I was not working and diabled. I mailed them a letter from my Doctor. I hoped my heath issues would improve. I went with zero income for all those years. Only got disability a few years ago and do not have even enough to live on. And the interest mounted because they never froze or wrote off my loan due to disability. I sent letter but at that time did not know there were forms for my two loans. The loan could have been discharged by now with zero payments if I had been properly advised. And my health was and remains so poor that I can barely stand and brush my teeth many days thus I am in severe decay. Three years ago I found out about the disability form and realized that is why they never discharged the loan and had my Doctor fill it out, waited the three years for discharge and never heard a thing. My guess is the collection agencies- never processed my discharge based on permanent disability. Let us talk about the reality. A person should not have to be severely disabled and live under a cloud of loans. Loans should not take three years to discharge. And proper information should be provided when you take out a loan, and when they see you are in trouble telling you about the income based repayment plan. Most people are guilty of nothing more than lack of knowledge. Then they get overwhelmed and do not know what to do. And Student Loans should have a self life, it is nothing but tyranny the way the Government can allow a loan to haunt you for the rest of your life and not even say- you could not pay for 20 years so it is finally canceled. And a loan that can not be discharged in a bankruptcy is tyranny on the part of the Government. No other creditor holds this type of power. If this administration wanted to help for real, they would limit the time and allow amnesty on very old loans. And I would suggest that those who judge people who get in trouble on student loan remember the old saying my precious Mom , who passed with cancer use to say, Never judge another person until you walk a mile in their shoes. And there but for the grace of God go I. Compassion is a virtue we should all practice.
Marion you hit the nail on the head. Amen to your statement. Yes hundreds of thousands of souls across America cannot all be wrong. There is no way out with the extortion fees of interest tagged on. They dont want the principle ever to be paid, they are making too much money being fat off of everyone else s hard work and stolen pay.
I want to settle my loan. ECMC will not allow me to and have told me that I need to agree to a 30 year interest only loan and that is my only option. This does not sound reasonable. I have paid for the past 5 years by wage garnishment and tax seized. The original loan was $30k, the principal balance now is 48k. I have paid $500 of every paycheck the past 5 years and $11 each month wnet to the principal which clearly did not even cover fees and interest. I just want to settle but ECMC wont let me because they have the power to collect money from me in perpetuity.
Lynn, thanks for the response and I know the math doesn’t make much sense. That is why i called them and they told me that I had no right to negotiate with them. They told me I had one option and that was to agree to a thirty year, interest only, loan. I have hired a lawyer and they have refused to settled with them either. My confusion is why a company believe it is acting in good faith when they have offered this only option. Since my loan is not tied to any tangible item that can appreciate I’m not sure why this is even a lawful option from a company with the support of the DOE.
They are under absolutely no obligation to settle with you….your income puts them in the drivers seat. Hiring an attorney was not only a waste of $$, but it told them you have money to burn. Get the payment history and consoldidate the mess. You will automatically be assigned the Income contingent repayment plan due to the default but with your income you can pay it off quicker. Get the payment history.
Also, why is there no offset for the wage garnishment or taxes seized. The original loan was $48k now it is at $62k. Fees ? I thought that my paying $500/ month was going to something over a 5 year period. It appears that i could have paid it off with my Visa card and did better. 8% seems fair but in reality it is 8% on top of another 25% which isn’t fair. I understand you have no sympathy for us because you believe that we put ourselves in this mess but I think there is a lot of predatory lending going on here and there should be a way to pay off the loan.
Thanks for your instruction. You clearly are a master of this domain. I can only assume your expertise is from years of working with ECMC or another collections agency whom you probably still work for. I hired a lawyer only after 2 years of trying to get the payment history from the company which they could not find for 2 years. I agree that they might have no incentive to settle but I thought that the law would compel them to to do what is right. Now let me get this straight, by law they are only allowed to charge the fees once? right ? i think someone is wrong, either them for charging 12k in fees three times or you assuming they couldn’t. What is my recourse now?
Thanks for confirming my suspicion – I wondered what you are doing these days. If I was in default it was years ago. 5 years of payments is well beyond what a rehab program should be – it should have moved into non-default – I never missed a payment in 5 years. I have contacted ECMC over the past two years, they cannot provide the info I requested. I am getting ripped off by everyone. I know that is true. i will let more people rip me off if they promise to rip me off less and help resolve this issue. Why were they were able to charge fees three times and why they won’t let me pay it off? It is very interesting… the posture you have taking with everyone who comes to this site looking for help and also very interesting that you have a very good very good working knowledge of a “client of yours”. Perhaps you can assist by helping me pay this off? I will let you rip me off too.
John – If you learn of any irregularities in how your payments are being applied, or how fees/penalties/interest have been assessed, I encourage you to file a complaint with the CFPB here. I continue to be impressed with the efforts of the CFPB in raising awareness about student loan affordability and fairness. I have also been impressed with how rapidly they engage with consumers and businesses when complaints are filed. Even if there are no irregularities to how your loan has been assessed fees, I would encourage you to share your predicament with the CFPB through their “tell your story” feature on their site. Highlighting the issues you are facing, even though similar scenarios have been documented in the media, do make a difference, and will continue to tip the scales toward fairer student loan borrower treatment.
Lynn its a racketeering with the interest, people get kick backs off all the money accrued, they hope you do default. For someone that supposedly did this for years your personality with people shows its true. Lack of humanity and care. Any other person, or organization would get slapped with nothing less then extortion and preying off clients.
You would first want to get off the garnishment, and the easiest way to do that is through 5 Rehabilitation payments. If they are not allowing you to do that, then you should try to file a complaint with the student loan Ombudsman. ECMC will not have much incentive to take a settlement when they are able to garnish your wages and tax return. Unfortunately, a large amount of each payment taken via garnishment or tax offset is first applied to fees and interest.
Once the garnishment is stopped, you may be able to settle, but federal loans rarely settle for more than 10-20% of the balance including interest. In some cases, they can reduce interest and even a small amount of principal.
They were also not being honest with you about payment options. There are a variety of payment options based on income that cover both interest and principal payments, but the accounts have to be free of garnishment and brought current before those plans can be applied for.
Hoping someone can give me advice…
I have a complicated situation, and I am wondering if going into default and paying a lump sum would be my best option.
I have a federal consolidated loan with my now ex-husband of about 42k originally (from Sallie Mae). I gave up rights to alimony and half of his 401k in return for him taking on the full responsibility of the 42k loan. It has not been paid for several years and is in danger of defaulting but has not defaulted yet.
If I pay one month payment or sign a “fresh start” application with my ex, I can bring the loan back into good standing. However, my credit for the next 20-30 years will be at his mercy (and he does not have a good history of payments and may sometimes just stick it to me with a late payment). However, if I borrowed money from family and friends, sold a car, etc. to come up with money for a settlement, then I would not be at his mercy. I could then take him to court and sue him to pay me that money. And if he was late paying me, at least that will not affect my credit. It frustrates me to have to do this, but I just want to be done with him (he abused me and is a very controlling person); either I sue him to pay me, or else he pays late or not at all and it affects my credit.
So, I am wondering… do I get my loan back into good standing and hope to God he pays on time for the next 20 years or do I default (it goes to the guarantor EMCM solutions) and hope to get a settlement?
Also, what kind of settlement can I hope for? 42k original loan, almost 46k accrued interest and principal up till now.
I hope I made it all clear enough. Thanks for your help.
-Heather
Hi Heather, sorry to hear about the difficult situation. I recommend that borrowers do not strategically default on federal loans to settle them. The reason being is that the collection fees added at the time of default often outweigh any limited settlement reduction. Usually, settlements are 10-20% off of the balance, and defaulted fees increase the balance by 18% or more.
So you can see there isn’t much in the way of savings there, and it could actually result in a net loss versus paying it off when it’s current, pre-default. If you’re talking about a spousal consolidation loan, which has since been discontinued, this is certainly a tricky situation and you may want to talk to a third party federal loan specialist. Feel free to call the hotline and press option 4, and we can refer you to one.
Hi. Thank you. They say I owe $40,000 but I have paid in $21,000. Doesn’t that amount to something? I didn’t know that about the 3 years hardship. I had a lot of people asking for money back then. I understand my status does not give me special status but I thought they should consider all of that for my settlement offer. Anyway, thanks very much for your prompt response.
Hi,
I was directed to this website by Senator Elizabeth Warren’s staff. They have been very helpful and this site is as well.
I have a student loan that I believe was consolidated in 1999 to $21,000. I went into default a couple of years later as a result of a failed construction business. Since then I retired from the military, National Guard, I have a hearing disability from the VA and I have been working for federal and state government since 2009. I have been in the federal offset situation with my taxes since about 2005 and through that have paid in $22,000. I would like to settle for an amount since I haven’t had credit for a long time and my oldest son will be attending college in a year. How do I settle? I have contacted my senators and representatives and the Dept. of Ed. Ombudsman but can’t get through to anyone to settle. I think I deserve some consideration because of myveteran’s status and my government employment and the fact that I have essentially repaid the amount I borrowed. Please help me. Thanks very much.
Hello, you would want to contact your federal loan guarantor to settle. Sometimes you can also settle with a collection agency that the federal loan guarantor has contracted with to collect on their behalf. If you’re not sure who your guarantor is, you can find out from the NSLDS database at http://www.nslds.ed.gov.
If settlement doesn’t work out, you could also consider Public Service Loan Forgiveness, but you would have to get the accounts out of default through another Direct Consolidation (if you’re eligible) or Loan Rehabilitation.
Lynn,
Thank you so much for being so kind and ever so prompt. I had my reasons for delaying so long. In early years of default, I didn’t make any money. In the last 5 years, my income has been all over the place……….I’m not talking about making 50k one year then 65k, 80k in the following years. My income swings wildly from 100k one year then 0(yes, zero), then 50k. Over the years, had I not saved up, I would’ve been on rehab, then default, then rehab, then default again, and so on. But one thing for sure, I’ve been saving up last 5 years so that I can payoff this loan.
I have one final question, or clarification…. suppose I earn $50k in 2013, and I settle this debt at $100k(75k principle + 25K interest…..25k collection fees waived), do I file taxes for $50,000(income) + $25,000 waived collection fees – $2500 interest paid = $ 72,500 (for our purpose)? What happens to the remaining $22,500 in interest paid? does it get carried over to future years as does loss due to stocks?
Thank you again,
Hi Jeremy, we are not able to give tax advice unfortunately since we are not tax advisors, so this question would be best addressed to your CPA or tax professional.
Lynn,
Thanks for your response.
1. I do have a big portion of settlement amount saved in cash, and I am borrowing the rest from family and friends. Could this become a problem? also, there’s no hardships involved.
2. Settlement of Principal + full interest………… is this the norm? after some research, i was under the impression that principle + 1/2 interest is achievable. (or 90% principle + 90% interest).
3. For tax purposes, wouldn’t the collection cost waived be offset by paying all or most of the interest paid in the settlement?
4. why is there substantial difference in amounts borrowed in some of my loans? for example, on one particular loan, I borrowed $8500 and the principle says $8800, and on another loan, the amount actually borrowed is $30,000 but the principle shows as $33850?
5. I recently received another Notice of garnishment letter(30 or 35 day notice). why is it that I keep receiving these letters yet nothing ever happens? Is it because I’m an independent contractor? They haven’t levied my bank account either.
6. I knew that ECMC is the main holder, and they basically passed it around different CAs over the past years. I’ve tried calling them several times, but it seems like they are not allowed to negotiate with me directly since they are under contract with other CAs. Is there no other way to deal directly with ECMC?
Thank you Lynn, this has been a big burden in my life, and I really appreciate your help.
Hi Jeremy, I know this was addressed before, but just to add my .02 here –
1. Settlements are commonly funded through family so this shouldn’t be an issue. A defaulted loan is often the result of some kind of hardship, even if it is not something serious like a medical condition etc. You would just want to emphasize your financial hardships if there were no other hardships.
2. The norm in my experience is for federal loan guarantors to only remove 10-20% of the balance at most (which is usually just a portion of accrued interest), although I have occasionally seen them remove accrued interest and even a small amount of principal.
3. Usually collection costs are removed as part of the settlement agreement.
4. It sounds like this is due to accrued interest and/or late fees + collection fees.
5. If you are an independent contractor, it may be tough for them to garnish your wages. It sounds like they were trying to do that but were unable to.
6. Usually you will need to deal directly with ECMC if they are your collector or loan guarantor.
Hi Lynn C,
I would like to ask for your honest opinion. Thanks ahead for your thoughts. I owed principal total of 75k in Subsidized and Unsubsidized Stafford Loan(are these federal loans?) for 10 years. Since then I’ve accrued total of 25K in interests and 25k in collection fees, respectively. I regret running from this matter, and I am thinking more proactively now. I called up Progressive Financial Services(who must’ve got the contract from ECMC), and they are willing to let go the 25k in collection fees, but no interests…….. do you think this is a good deal if I were to make a settlement(75k principal + 25k interest). I’ve heard of few Principal + 50% interest settlement stories via ECMC while doing my research online. Should I wait until ECMC becomes the primary agent?
Hi Jeremy, responding to an old post here, but that is a pretty typical settlement offer. ECMC may or may not get the account back, so it may be worth going for the offer you have now, or pressing them harder to accept a reduction in interest. The federal loan guarantor still holds the loans and was just contracting with the collection agency, so you should be able to get the same deal that you had been offered through ECMC, with Progressive.
OK, Gonna bite the bullet and rehab – at least they’ve offered to lower the collection costs to 9%.
Thanks for your help!
Matt
Hi Lynn
Lol. Lord no! I owe 19k, not 190k!
Does that change my situation in terms of what happens if I don’t agree to collection costs and therefore don’t rehab (but keep paying)
Thanks
Matt
Good to know.
So if am going to negotiate the collection fees at the stage of signing the rehab agreement, how to I go about it? What happens if I just keep paying the collection agent and never agree to the rehab (thus stopping the collection agent from selling the loan that I’m making payments on)?
Thanks for your help!
M
Here is a question for you:
I have two defaulted loans totalling about 19000.00. I have followed the rehab program for a year and my loan is about to be rehabbed and sold back to ASA. I have avoided agreeing to the rehab agreement because I didn’t want to pay the 18% collection costs. The collection agency has, without me asking, offered to lower my collection fees to only 9%.
I’m about to sign, but I’m wondering if I can do better in the negotiation, as I am actually out of the country and have no plans to ever return (I actually never even lived in the States – I applied for the loan to go to a college in Canada, where I was born to US citizens, hence my US citizenship/qualification for the loan). Given that fact, is there any good reason to not hold out for a better deal? I’d rather not have my US credit rating tanked but its not like it effects my life in any real way… I want to pay my debts by even 9% seems excessive!
What do you think?
Matt – The 50% reduction in collection fees may be as good as it gets. But the fact that the student loan collector offered the reduction unprovoked may be an indication you could negotiate a couple of points off. It is worth the effort. Just do not expect much more of a reduction.
If you are in a position financially to commit to the repayment, do it. Who knows where life will lead you. Student loan debt just does not go away like other debts. Paying it off when you are able just makes sense.
I have about 180,000 In government loans and that is with an undergrad and masters. I differed my loans for about 6 months now because I became unemployed and went to rehab for alcoholism. I am out now and I am still unemployed. I worry about how to pay this back but as of now I am not past due because I am using the differed time. I would like some advice if possible Micheal.
Your payment on an income based repayment plan would be really low given your lack of income. And the sooner you get started on something like that with federal loans the better.
Have you any aspirations to work in fields, or with nonprofits, that could result in loan balance cancellation or forgiveness?
I just lucked into your answer to me not realizing you had sent one. Thanks for your input, and you have a valid point. However, you are a bit of a hard ass. I will admit if I had had anything to say about it earlier, she wouldn’t be in such a mess, but you and I both know that it’s impossible to find a decent job with a bachelor’s degree. She was unemployed for a short time last year and is currently underemployed. Also, most of these young people don’t even know what their options are. You do–but you’re a professional!
I went through a bit of hell myself just finding out what my options were. The default status is being lifted in about 2 weeks and I will be able to research the best way to handle this. Thanks for answering, but the kids give up because of the runaround they get when trying to figure out how they are ever going to pay these debts to a government which is sabotaging the job market even as we speak.
Apologies for any rudeness from the previous poster, that’s why their post is no longer showing. Hopefully you’ve been able to move forward, if you have any questions about payment plans etc. now that you’re granddaughter is out of default, feel free to respond here and I’ll do my best to answer.
I am 80 years old and am going to try to pay off my granddaughter’s student loans. They have been in default for only 5 to 6 years, but the collection costs are outrageous. It is criminal what the federal government has done to these students who will never be able to repay these loans. I only became aware of her problem last year and have spent a lot of time trying to help.
I have been paying out her default status and have only one more month to go before I can negotiate something. However, the principal, interest and 18.5%?? collection costs adds up to twice as much cash as I have on hand.
Does anyone know if there is a chance of negotiating a 50% settlement?
Hi Marian, responding to an old post here but it would be difficult to settle for 50%. However, your granddaughter could consolidate the loans out of default and get onto an IBR or REPAYE plan which would be based on 10-15% of her discretionary income for payments.
First of all, I want to thank you for your reply 🙂
Yes the amoount is correct. About half is actually principal, the rest is fees and interest after I stopped paying. My payment plan was set up for 10 years and I payed off the interest first and then started on the principal only right before I went into default. I am curious as to why you think they will not sue me for that amount?
I read the page you linked to and found this of interest:
“Perkins Loans cannot be included in a Direct Consolidation Loan by themselves.”
I believe all of my loans (and they were done every semester) were Perkins loans through the Wisconsin Higher Education Association, although I cannot be certain as I went to school some two decades ago.
Just to chime in here, federal loans rarely sue – they usually just try to garnish wages or offset tax returns which they can do without a lawsuit.
If you had an additional loan to add, such as a Direct loan or a Stafford loan, you would be able to consolidate those with your Perkins loans.
Hi, I have about 150k in federally backed loans. If they defaulted I know I would stand likelihood of wage garnishment and tax refund offset. I was wondering if my bank account could also be frozen, or is this practice typically done with private loans only? I’m very worried about this because the only income I have going in the bank is my mandated direct deposit check from my job, we are a family of 3 living on almost poverty level income and if I am wage garnished AND account frozen they would be taking all of my money to survive not just 15%. From my pay but my whole check Which would leave no money for food, rent, etc. Also Is my spouse account in danger? Thank you.
I have a federal student loan in default of $11,507. It has been in default for about 10 years and has been sold to ECMC and they have, in turn, contracted it out to several collection agencies over the years the current one is ACT of Concord, California. I have no job and no income and I live in the state of Wisconsin.
My situation is that I have been taking care of my mother for many years to keep her out of nursing homes but, sadly, she will be dying in a few weeks at the most. When she dies, I will get about $5,000 from her employer insurance Death benefits along with my siblings (she had us listed as beneficiaries and it will be split and amount to around $5000). Furthermore, the property will go into probate and is worth around $70,000. This will be split 4 ways because she has no will. From what i understand, the estate has to be open 4 months here but can be open longer. I have contacted an attorney already to take care of estate planning but my concern is the collection agency. I have maintained NO checking accounts over the past decade and only have cash on hand. In other words, they do not know what assets I have because there’s nothing on my credit reports. My assets are very limited.. under $1,000 total.
I filed for bankruptcy 3 years ago to alleviate a mountain of credit card debt and was told that student loans arent eliminated. My bankruptcy was a “No Assets” bankruptcy. When my mom passes away and the collection agency finds out about my death benefits, I’m guessing they will sue to get their hands on them. Is this a reasonable assumption?
I have never contacted ECMC or any of their collection agenices and I do not answer their phone calls. With all of this money coming soon i am worried they will simply sue me and take it all. I know death benefits are not taxable in most instances but what about lawsuits? What are your thoughts?
Thank you and thanks for having this website.
Dana – You should consider getting proactive about resolving this now, with an eye on preventing your fears from occurring.
Contact ECMC and ask what is the least costly way to bring your student loans out of default. There are options for doing so, even with your current lower income. Once you get the loan out of default you will have other options, like an IBR (income based repayment plan) that would set your payment based on your income reality at the time you apply. You cannot get set up with an IBR when the loans are in default. If you start looking into your options now, you can be set up with an agreement fairly quickly.
I would at no time mention money you may come into. Just stick to your income situation, that you had to file for bankruptcy a few years back, and are trying to recover financially and need a plan to do so, and that is why you are calling.
I am not very good at talking to bill collectors on the phone, which is why I always avoid them at all costs, and from what I have been able to gather, that is what ECMC is – a bill collector. They buy up student loans in distress and then try to collect on them. I am a perfect mark for them as I simply can’t find the words to defend myself once pushed into that situation – it’s a real problem for me.
I really don’t know what to do about it. This situation with my mom does change things which is why I am worried. Google has changed things like debt collection forever.
Ok here is a legal question for you: Would any agreement I get into have to be changed the minute I came into any money? From what I understand, these agreements are contingent on my income and if income changes, I have to notify them.
Thanks for your time on this. 🙂
Hi Dana, just responding to an old post here – for any legal advice you’d want to speak with an attorney directly.
With that said, I can’t think of a situation where ECMC would be able to discover your mother’s death certificate.
You can always consolidate your loans out of default too, if they qualify, using the Direct Consolidation process.
Lynn you sound very knowledgeable. I have a daughter that has been in default since the 80’s. She has just recently decide she wants to get back on track and get it taken care of. I want to help as much as I can. Could you please tell us where to start the process ? Any and all info will be appreciated.
Hi Edna, I know you posted this several years ago but thought I would respond. Besides settlement, which is limited, the two main options to get out of default with federal loans are Direct Consolidation (along with an income related payment plan) or Loan Rehabilitation.
I discuss both of these options in my free Ebook which you can find on my federal loan resource page here: https://www.mycreditcounselor.net/federal-loans/
@Lynn, I never expected a settlement for ‘Pennies on the Dollar’ and never asked about that. I expect to pay the principal amount in full plus a reasonable amount of interest. I do not want to be thrown to the sharks. What was done to me when I was young is criminal but leagle I geuss. Nobody seems to care why I think I should get a settlement so I dont see the point in going on about it. To the CA I am just # and a $ sign, A name in thier book. I just want to hear from someone else who was in my situation that was sucsseful at recieving a settlement from a CA contracted by the Dept. of ED. and how they did it. I am very thankful for your input on this matter. If settlements are a common occurance I am surprised that I don’t hear from more people on this site about it, this is all I am saying.
Hi Shawn, federal loan settlements happen regularly but they are rather limited. Here are the guidelines, from studentloanborrowerassistance.org
“Collection costs can be waived.
30% of principal and interest can be waived. If a guaranty agency chooses to compromise more than 30%, it cannot waive the Department’s right to collect the rest.
50% of accrued interest can be waived”
@ Lynn, so are the ‘Standard Write Off and Compromise Procedures’ I have read about just a ‘Dupe’ and pretty much worthless as a nagotiating tool in these situations?. It sounds to me like your saying that there is no ‘realistic’ option except to rehab the loan. Also that the only bennefit from this would be 18.5% collection charge against payments instead of 25%.
Is there ANYONE on these post who has had expierence with dealing with a Settlement on a Gov. backed loan that can share the procedure and the results with me?.