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.
What site did you log into?? NSLDS?? How much does it currently say you owe??? How did you ask ECMC for proof? Verbally or in writing??? You actually borrowed GSL and SLS loans….Stafford loans did not come into being until 1992. Interest rates back then were as high as 14%
Student loans have been non dischargeable in BK since 1998 so it appears that effort was a waste of time and money. $30K those higher rates of interest plus capitalization of the interest plus collection fees and more than likely subrogation fees can very easily increase your loan balance by 10’s of thousands. You paying $19k is only a drop in the hat…probably doesnt cover collection fees ! A word of advise….quit wasting money on a bankrutcy attorney who probably doesnt know about student loans…very few understand them.. And if he took your money to file them in bankruptcy, he is a crook at that! Do your own research, figure out what and when you borrowed. Who the lender was, who the guarantor was. If you borrowed $20k and were in default by 1998, you proably owed in excess of $50k or more then. Did you ever consolidate??? Rehab???
I graduated in 1988 . Ecmc did respond but all they had was 1,2,3,4,5 with the amounted owed in each line. So i had the bankruptcy lawyer contact them but he did not respond to them in time which i am not happy .
I log in the nslds and it said I owed stafford loan from 1982 to 1987 of 31228 and interest of 41144.
I borrowed 30000 with rule of 78 which the interest rate was 7 %. When I graduated I did pay for about 2 years until my office got destroyed in 1990 and 1991. I could not pay the loan at that time and Iost the information and after many years . I did not consolidate or rehab.
I just got garnished from the new York and Massachusetts. I thought that after that I was done. I was told by the second garnisher( western district attorney of nc) that ecmc tried to get some money from them also. I asked the district attorney if I had any outstanding federal loan. She looked up my social ( a national website )and said that I had no federal loans outstanding.
Now since I know what I borrowed and I paid both states how can I stop the garnishment? It was the same loan since you mention that it get assigned and that is why I was confused on what they were asking for.
I do not have the first release from the first garnishment because it was a collection agency or the student marketing ?? But it was satisfied. Do I go to the bank where I borrowed the money from ?? I do have the copy of the loan paper but I do not know who ended up with it. I do have record of the garnishment from paycheck . Would it be in the judgement in new York court?
I believed all monies have been paid ( 60000) already. If I was garnished it would only have been from student loan and I don’t think they can keep Collecting money that is not owe or can they keep collecting?
Is there an attorney that can help me get them to stop this and get my money back?
This sounds like a difficult situation. There actually have been some federal loan discharges after 1998 unlike the previous poster said. But it’s very difficult.
One attorney who has recently discharged federal loans is Christine Kingston in California.
Attorney Joshua Cohen of CT also has experience with discharging student loans and even has a training program for attorneys in other states, and he may be able to recommend an attorney in your state.
Lastly, I would say that it’s possible that your wage garnishment was from a state based agency like NYHESC which would explain why it’s not showing up on your federal loan database. But to get to the bottom of this it sounds like a comprehensive evaluation would be needed by either a federal loan specialist or an attorney with experience in federal student loans.
Can any tell me what I have to do to get ecmc to stop my garnishment? I was garnished in 1998 and was it was completed and was told i have finished paying the new York higher education loan( stafford) and then I went into agreement with north carolina district attorney office to pay the Massachusetts higher education loan that I owe. After that was done I receive some letters from ecmc saying I owe 90,000 . I asked for proof and they never send it. So I went into bankruptcy and put them into hoping it would take care of them . But after the bankruptcy was paid the ecmc sent a letter stating that student loan was not dischargeable in the bankruptcy after they have collected 19,000 and they said I owe 90,000 . Now I went to the site where you see if you owe any thing it stated 5 stafford loan . I asked a lawyer in California if I have any outstanding federal student loan owe and they said I did not have any outstanding loan. So now I went to my bankruptcy lawyer and told him that I don’t owe any student loans because I have payed them through the garnishment. He sent the letter and have not gotten any reply. They are garnishing me $500.00 every 2 weeks . I only borrowed the 5 guarantee student loans ( under the 78 rule) total 30,000 in 1978 to 1988. How can I get them to give me back my 19,000 that I paid in the bankruptcy and the unjust garnishment ?
Please see below response.. with so many loans and agencies involved here it would be difficult to provide a complete answer here. Feel free to call into the debt relief hotline and press option 4 for a further evaluation. If you’re in California I’d strongly recommend contacting bankruptcy attorney Christine Kingston in Orange County, she has been able to get federal loans discharged and may be able to get to the bottom of your situation.
Student loans seems so much like government sponsored debt slavery. This easy money is given to people from low income families who were never taught anything about the money system by the school system. The same school system indoctrinates them into thinking that the only way to succeed is to purchase a degree for an absorbent amount in hopes that they will be able to pay off this debt later. They are old enough and smart enough to sign but, not able to understand the compound interest or what happens when you don’t pay.
Even given that circumstance, compassion seems to be intolerable by everyone speaking on the subject. It seems perfectly acceptable to say that these people are undeserving. Everything sounds like generations of people simply did this to themselves. It is even being advised that these people don’t need any help from anyone and should deal with this as part of a tough love lesson. Their is a reason that 18 year old, let’s be honest, children, are being approached for these huge loans. This country’s approach to education is stiffing the country’s economy, families, and innovation.
It is being said, that you should talk to your lender. Where is your independent information outside of those that are threatening you. Where is the clear information without the shaming? I’d like to see the laws on the books and also speak to an advocate who’s secondary goal isn’t to make sure that I know this is all my fault. “Oh you should have…” is the equivalent of “I told you so” and really is completely unhelpful. After the fact you are pushed to sign whatever, contractual agreement in order to be able to feed yourself or generally resign yourself to poverty.
If this system isn’t broken where are all the comments from people on the other side who are easily paying off their student loans and moving forward into a economically prosperous futures. I will not be advising my children to go to college, just like cable, it isn’t really worth it anymore…
The easy student loan money does not just target those with low income, far from it. The student loan issues we have as a nation reaches into a huge swath of middle class America. And just because the majority of new college students recently left high school, I see a huge lack of understanding at all age levels, of the value and the rate and size of return that can result from taking out student debt (in our current economy and job market).
As far as resources for dealing with student loan debt that are not overly biased or judgmental, there are more and more available for government loans (which represent the bulk of student debt). There are also reforms that are ongoing. The DOE just fired 5 collection agencies last week. For those who do not know it, that is a very big deal, and one that would not have occurred just a few years ago.
There is a much larger picture to what today’s student loan affordability does to the nations economy. There are improvements that can be made at an individual level, no doubt about it. But individual responsibility can only go so far.
The administration announced some policy developments around student loans today: https://getoutofdebt.org/86772/student-aid-bill-of-rights-to-assist-federal-student-loan-debtors
I expect some good will come from the servicing and collection pilot programs.
Hi
My loan had been in default for over 20 years , I started paying and I stopped , and for the past 15 years they have kept my tax refund , my balance was 6000 something , I filled ch13 and for 5 years they did not collect from my taxes I just you received a bill for 29000$ as if they never received a dime ……… WHAT is my next step , this is outrageous. Opinions please
That’s quite a bit for the loan to increase, but with a CH13, unless you are pursuing a discharge through an Adversary Proceeding, the Dept. of Ed will just put your loan into a forbearance which causes additional interest to accrue.
Also, interest and fees would have been accruing for the entire 20 year period that you were in default. I understand that borrowers want their loan to be the same balance that it was decades ago, but this is just not realistic for a federal loan that’s been in default for so long.
The good news is you may be able to settle it for a reduction in the accumulated interest. Federal loan settlements are rare, but the lowest federal loan settlements I’ve seen occurred in situations like yours, where the loan had been in default for a long time and racked up a lot of interest and fees.
The tax refund was probably not doing much to dent the loan even if they took it every 15 years, because a large part of any payment goes towards late fees and interest when loans are in default. Another way to deal with this would be to use the free Direct Consolidation program and get out of default and onto payments related to your income, but the downside is they would be going off of the current balance. Trying to settle with the guarantor may be the only way to have a significant portion of the accrued interest removed.
Hi Lynn. I hope you can answer my questions or provide some guidance. I have 4 Subsidized Federal Stafford Loans: (to attend community college starting fall of ’03. Graduated fall of ’08)
loan #1: $2,625
loan #2: $1,969
loan #3: $2,625
loan #4: $1,750
TOTAL: $8,969
I began paying on the loans after the deferment period – never late.
January 2010 – filed chapter 13
April 2010 – loans transferred to ECMC and in forbearance due to CH13. Stopped making payments, per CH13 agreement. TOTAL transferred: $7,243.31
September 2010 – enrolled part-time in state university to complete bachelor’s degree (most of tuition paid by employer but did obtain a Direct Subsidized Loan for ~$5500)
May 2014 – Graduated – began paying on direct student Loan
August 28, 2014 – CH13 paid and discharged
I thought that as soon as my CH13 was completed, I would be contacted by ECMC to resume payments. I also have read that the loan gets bought or transferred to another company. I have made 5 payments voluntarily. Total balance as of today is $7,864.85.
Q. 1: Because I was enrolled in college at least part-time during most of the CH13 time, should most of the accrued interest be waived?
Q. 2: Because I was not in default prior to the CH13, will I be assessed collection fees and a higher interst rate by ECMC?
Q. 3: is it unusual to not be contacted yet?
I have sent 3 emails to ECMC asking about deferred interest but I have never received a reply.
Please advise. Thank you Lynn!
I have not spoke with anyone at ECMC because I cannot get through to anyone by calling and none of my emails have been returned. But yes, I have made voluntary payments the last couple months. I’m not even sure what the minimum should be so I pay around $75.
Thanks for your reply.
Hi, it is common for interest to accrue when federal loans are placed into CH13 – most servicers just put them on forbearance. It would be tough to get that waived. Your federal loans should not have gone into default while in CH13 because they should have been on a deferment.
It’s better to call ECMC than email them, I’ve found. Lenders and loan servicers aren’t always the most proactive in getting back to borrowers once a CH13 is done, so it’s probably a good idea to reach out to them.
I received a loan in 1986 when I was 18 in New York. I attended a school that is now closed and had to drop out to care for my mother who was dying. I moved to North Carolina in 1997. I was contacted by a collection agency in 2008 regarding payment arrangements. I paid as specified until 2011 when I made my last payment. A total of $6200.This show up on my credit report accurately. I just received a notice from IRS saying refund was taken to pay this student loan. I pulled my credit report to find 6 other open accounts for this loan. All open on the same day as the one that I paid. I cannot remember the initial amount of loan or the type of loan. I am so confused as to where to start to fix this. Can you make a suggestion?
I think the best place to begin would be the National Student Loan Database at http://www.nslds.ed.gov. You will need to create an FSA ID (available on the same site) to be able to log into your federal loan database report.
Credit reports can often show duplicate listings when federal loans are transferred, so that may have been what happened here.
If your tax refund is being seized, it means that the loans have gone into default. Was the $6200 you paid the total balance of the loan? It sounds like there may have been some other federal loans as well outside of what you were paying to the collection agency. The NSLDS would be a good place to start, but to get to the bottom of this would require a more thorough evaluation. Feel free to call in to the debt relief hotline and press option 4 if you’d like to talk further.
Thanks Lynn.
Lynn,
I have a group of future questions for you that I need to organize prior to presenting them. However I first wanted to convey my thanks to you for offering your insight and advice to others here who benefit greatly from it. My guess is this counseling is pro-bono as well. I respect greatly your values of personal responsibility and commitment, as a younger person it was the lack of these values that have created my need to post queries to you on this forum. I disagree with the few detractors you have had. Many of us have had the opportunity to handle this debt initially in a mature way but did not. I most certainly did not.
Thanks in advance,
TyrellRD
I have $7380 bal on direct loans @ 2.08% int. I completed rehab in Oct. As of 10/11 my loans were transferred to FedLoans. I’ve been making 2 payments per month since the began servicing my loans. One is $4.97 that they setup on autodebit so I can get the interest rate reduction. ( this was the reasonable and affordable payment set up with the CA). I’VE applied for IBR, which based on my income should be $0
The problem is I made a payment that posted 12/19. $3 of which went to interest, and the rest went to principal. 4 days later after my payment posted they say I have $14.91 in accrued interest. In the 73 days they have had my loans $52 has been interest. After spending an hour on the phone with them, a supervisor told me the extra interest is from before when the loans were in default.
My monthly interest should be roughly $12.50 month and I’ve already pd 4x that. If payments are applied first to fees, then, interest, then principal how is it that portions of my payments are applied to principal, and then they say there is still interest from default?
Wouldn’t all interest have been capitalized when the loan was rehabbed and then transferred? My understanding is that the interest should be paid by the government when my IBR pymt is less than accrued interest. (Subsidized loans).
Thanks so much for your help.
There may have still been accrued interest after the Rehab program, it is not all capitalized like it would be on a Direct Consolidation loan. I think that may be the source of the issue, but I think the best source to answer this question would be the loan servicers or Department of Ed who can access your loan history and see exactly how your payments were allocated.
Lynn. I have currently $26k in federal backed Student loans that Default. Tried to paid but when the economy went to the tank around 2008 lost my job and stop paying around 2010 I Stop paying Since then it’s gone into collections. I’m trying to be realistic as possible on what I can do now that I have decent job and finically I almost back to stable, I would like to negotiate it where I only owe the original amount which is $20k since $6k are in collection fees. Should I contact ECMC directly to rolling or the debit collection firm in charge currently in trying to get the monies? What advice can you offer to approach this matter so I can achieve this type of settlement? And if they do agree I like to pay money order/check since I don’t want them having access to any of my personal accounts how would I go about requesting that option only. Thanks in advance.
Hi Lynn C – Maybe you can help me
I was attending Grad School in 2010 and receiving student loans. It was an executive MBA program, and I left for a bit in 2011 when I got a new job. Classes were Fri + Sat, every month and each class was $2540.00
I tried to go back, but the school said I owed them for a class I took in Oct 2010. On Oct 19, 2010, my school received $9500 in Federal Loans, totaling just over $19,000 for the year. I told them they were paid, and they said that money was for other classes I took. They sued me, (I was away the date of the trial) and got a default judgment issued against me. Their lawyer refuses to tell me how the loan money was disbursed. I have applied for loan forgiveness, but it’s tough, because I technically owe the government the $$.
Each month I have to pay my student loan bill + my tuition bill to my school + their lawyer tacked on 40% interest or legal fees + an additional 6% interest for post judgment fees. I don’t think it’s fair that colleges/universities aren’t held accountable for how loan money is applied. They were paid for this class, they applied the money to something else. Why am I responsible for that? This is sooo wrong. I can’t get my degree until I finish paying them. I’m paying for the same class twice. I’ve contacted everyone under the sun and no one will help me. Any advice?
Since there is a judgment involved here, I think that a lawyer with student loan experience would be the best to handle this type of case. Joshua Cohen is a skilled student loan attorney who may also be able to recommend a student loan attorney in your state. He runs workshops for attorneys related to student loan legal issues.
This website is very educating. Learned a lot in a short amount of time.
Although I didn’t ask any questions, I enjoyed reading every last one of them.
Lynn,
You’re a hot ticket! Certainly wouldn’t want you on my bad side 😉
Many thanks for being so informative.
Hi Lynn,
Thanks so much for all of your help on this forum! Brief History: I took out 2 subsidized Stafford loans ($8,500) and 2 unsubsidized Stafford loans ($12,000) , a total of $20,500, for graduate school in 2007. My repayment for these loans began in November 2008 and went into default December 2010. ( I was not able to pay at the time of repayment as I had started a new business and did not receive any income the first three years, until it failed in 2010 once it was defrauded and cleaned out by an overseas investor. I began a salaried position in MA halfway through 2011 where I am still currently employed. My 2011 federal tax return refund ($5,172) was garnished in 2012 by Collection Technology Inc who is the collector handling my defaulted loan. Spring 2013, I worked out a payment plan with them and successfully made nine payments to them as required to rehabilitate my loan before the end of 2013 ($3,220). I kept calling the tax offset hotline following my completion of rehabilitation and my name had not yet been removed as of January 2014. That same month, I broke my leg and fractured 4 bones in my foot. I was not able to contact CTI until late February 2014. I asked them why they had not yet updated the US Dept of Edu and the IRS of my rehab completion. They said, “sorry but you were supposed to sign and send back the rehab loan agreement…so you will have to start over a new 9 month payment plan.” But I sent them this form August 2013, just a few months into my payment plan with them! I spent endless hours speaking to different people at CTI begging them to work something out with me. But bottom line- They did not have this agreement on file and it was my word against theirs…end of story. I was very upset but I understand I did this myself and could have avoided it all had I simply requested forbearance or worked out a payment plan long before my loan went into default. So, in March 2014 I spoke to CTI and discussed a potential settlement with them but since I now had two years of future tax refunds on returns I hadn’t yet filed (I was waiting to do this until my name had been removed from the federal tax offset list at rehab completion) it made sense that I would contact them to discuss a settlement once my returns were filed. *CTI garnished $8, 026 from my 2013 federal refund this past August and I am still finishing by hand my 2012. After garnishing my tax refund, last month CTI began garnishing 15% of my wages! Bottom Line here: CTI has taken a TOTAL $16,808.81 since July 2012…27 months to be exact….in tax refunds, a 9 month payment plan they never credited me for, and now my paychecks. I am still drowning in debt from my failed business venture in 2010 and CTI literally is taking every extra penny I have to my name yet my balance is now the same plus over $5k in fees …..The total principle paid down on my loan total is only $698! I am so overwhelmed with this right now, and I just need guidance on where I go from here to straighten this out. Based on my research, these numbers do not make sense to me. My loan balance should not be $25,000ish considering $16k has been applied to this loan over the course of 27 months?????
What?? I rehabbed my student loans in 2011. I never signed anything, it was recorded on the phone. I’ll be honest, I can’t remember what company rehabbed them. I made 9 payments, and then my loan was sold to Fed Loan Servicing. If you’re making your payments, they shouldn’t be garnishing your tax refunds. Call the Department of Education. Wait call this number 1-800-621-3115. If you’re not comfortable talking on the phone to them you can send them an email, https://www.myeddebt.com/borrower/contactusSubLinks
I definitely don’t have any expertise in this area, just my own experience, but I hope this helps. Good luck with everything!
Hi Lynne,
Thanks for your candor..I am hoping you can help me.
I have an 18k PLUS loan that has been in default since 1996. I have been unemployed and underemployed for several years and i have paid very little taxes due to my low, no income and living overseas and earning less than the minimum for dual taxation. I kept offering to make 100 dollar monthly payments but they refused, so I gave up. I have been living overseas for 17 years or so and I recently moved overseas again and it is likely that I won’t go back to the US now. I may be able to borrow money from family and friends to negotiate a lump sum payment. You mentioned I may be able to negotiate a deal with them. Do you think they would accept $8,ooo assuming I won’t come back to the US? Can they get any kind of judgement seeing as I don’t even live in the US?
Thanks in advance!
Mk
Nc
Hi Lynn, I’d very much appreciate some help answering the question I posed on sept 4th. Am traveling to the US soon and would like to call the collection agency and make an offer. Any guidance with what leverage I might have would be great.
I am going to radiology technology school ( i plan on paying cash for this school) soon and its been years but I checked my annual credit report and found that I had defaulted on two wells fargo student loans in 2009. This is by no means an excuse or a question to get out of any obligation to the debt ( I will pay it off but it depends on what is the best thing to do and I need some professional advice please.) My father was really sick and passed away and lets just say i wasnt feeling too good about life and I managed to keep up on my other student loans but apparently this one slipped through the cracks. Its already charged off …approx $5800 total. Transunion Note says to clear off records by 2016. Should I contact wells fargo to talk to them? Or wait till I get out of school in 2.5 yrs? Is there a way to rehabilitate this loan? I just dont want to open a can of worms here? Ive got enough saved to where I could pay it off but that would take my savings up almost all so im not really wanting to do that now. My preferance is to pay it off my first year out of radiological tech school. Help please. Thanks in advance.
I live in NC.
Like I said I know I owe the money and I wish I had not lost track of it but I cant roll back time.
as I only found out about this default a few days ago when I tried to check my free credit report online and saw them. Should I maybe pay one off and then wait a while longer and then pay the other off?
Thabks for help in advance
Thank you for your reply,
I had one more class to finish when the school closed. I had to start working full time before I finished with only 3 classes to go but it was difficult to schedule them around work. I was not diligent regarding change of address and completion elsewhere was not offered. The information from the department of education printout says that I never attended the school so it will be hard to prove.
The printout had no information about address telephone number etc. Is there a difference between notification a debtor of a potential offset vs. notification of the actual offset? Who handles the notification, the Dept. of Education or Treasury?
I have no problem paying back the loan if I can’t prove my attendance. I completed 90% of the curriculum. I just would have liked the opportunity to negotiate before paying in full or setting up payments. Lastly, the database shows that the loan is still active even after the offset? The balances are very low but still present.
thanks for your time..
J.
I recently received a death benefit for my Dad from the Veterans Administration. The check was offset by the Treasury offset program for a defaulted student loan. I found out about it when I received my award in the mail. The amount offset was nearly 3 times the amount of the original loan. I was under the impression that death benefits, inheritance etc were exempt. I knew I had outstanding debt but the school closed before I completed the curriculum. I assumed the debt would not be collectible. The loan originated in 1994 and I received no offset notices from the dept. of education or treasury. The last 3 years I have been traveling in an RV so my address changed frequently. I do have paperwork that i am completing to attempt to have the loan discharged due to the closure of the school.
I also have called various offices to inquire about my unique situation. I feel as though I am getting a raw deal especially if the are able to keep all of what I paid . I was not notified of the offset or given an opportunity to make payment arrangements. One representative said that they mail notices it to the last available address. The last available address was known to them had to be the the residence where I received the award. I would have worked out some type of deal and not get gouged for triple the amount owed. The reps I spoke with say they will call back to discuss the matter but so far nothing. How do I go about proving lack of diligence and due process on the part of the treasury dept. in finding me when the obviously knew where I was.
J.Allen
Hey Lynn are you able to respond to my question I posted on September 10, I never got a response and would like to know what are my options, Thanks!
Thank you, Lynn, for your answer. Why is rehab out of the question? Do you mean that it would be out of the question to rehabilitate the loans without being prepared to pay the accrued interest and fees? Or are there conditions that have to be met to qualify for rehab (aside from making nine consecutive payments) of which I am not aware? The loans are Stafford, so they should qualify for rehab, I though. Thank you again in advance.
Lynn, I would be very grateful for your answer to my question. I have not lived or worked in the US for over 15 years and, given my age, the chances that I return there are remote to say the least. Nevertheless, I’d like to try to clear my credit history and pay off my loans through rehabilitation. My question is: for someone in my position, who has been living outside of the US for almost 20 years, has no US assets, income, nothing — is there a chance that the loan collection agency that has my defaulted Stafford Loans (now totaling almost 18,000$; went into default in 2008) will offer me loan rehabilitation -not a settlement, rehabilitation — but forgive all or part of the accrued interest and all of the collection fees? Under those conditions I would be willing to give over all my liquid cash (ignoring the fact that I have no retirement pension, no husband or help, and massive mortgage debt for an unsaleable apartment in a country where I no longer live) and pay off the principal in full. I understand that normally rehab does not wipe out accrued interested, but I am wondering of those of us who can prove that we have been expats for many years might have a bit more leverage. Your answer would really be appreciated.
Sorry, I meant to write: can they find and harass me here in Europe at my work? At present they don’t have my contact data here but googling my name turns up my work number and address.
Hi, this is a great forum. Lynn, thank you for your extremely informative replies. I am in a similar situation to that of Dave: I live and work in Europe, am going through a divorce and finally have a secure job but a very uncertain financial situation. I would like to negotiate a settlement on my loan, which has been in default for years. My question is: do I have a chance to negotiate a low settlement since I own nothing in the US and declare no taxes there? Can they do anything to hurt me, like phone my work and harass me there or get part of my wages earned here? Any information you can provide would be greatly appreciated.
Ok let me start from the beginning October of last year I started the rehabilitation program with Pioneer Credit recovery, I filed my taxes in April of this year even though I was told since I was in the program my taxes wouldn’t be offset…..WRONG my taxes were still taken and I completed rehabilitation in June, and my loans were transferred to Fed Loan Services. Meanwhile I applied for a hardship with DOE and was refunded $1170 of my taxes back. Well when I tried to get fin aid this semester and contacted DOE to get a fax showing my loans are out of default. I was advised that my loans are in fact out of default but because I applied for the hardship and got a return back for my portion of the taxes I now have to pay DOE the $1170 back before they can send the school the paperwork showing my loans are not in default. My question is are there any alternatives such as consiladating that $1170 with my new lender Fed Loan Servicing because I don’t have the money to pay that back hence the reason I applied for a hardship.
I recently got my loans out of default but applied for a hardship which now shows a balance of $1170 that has to be paid to DOE before they can send a letter showing my loans are out of default, well i applied for a hardship so of course i don’t have $1170 in my pocket, and now im being told that i have to pay that balance first before any letter can be sent to award me Fin Aid, is there any way around this, can my new lender take on that balance as I am still making monthly payments to the dept of edu?
This site is a gem. I appreciate the time that’s went into answer people’s questions here. Hats off.
I moved to Europe some 15 years ago, fully intending to pay off my student loans, but it didn’t work out that way (will spare the details) and they defaulted. They harassed me at first but gave up after a year or so. Fast forward to today. The loan amount grew from 10k to 30k. I do not plan on returning to the US but am considering trying to settle to keep my options open and, well, get rid of it! A few things:
* I’m a dual citizen. Have flirted with the idea of giving up the US one.
* ECMC think I live in the states, but will likely eventually find out that’s not so
* There is no US income, SS, property or anything they can get at. They don’t know i make money.
* I can get a loan here to pay off a settled amount.
I’d really appreciate any advice about how to approach the settlement thing with them. What should I aim for as a reduction, given my situation? Would me not being a citizen anymore change things at all?
Thanks in advance!
Received a letter in the mail from ECMC stating that I have a student loan in default and in 65 days they are going to start the treasury offset process.
Strange part is I have been in repayment status through the Direct Loan Consolidation process since 2006, never missing a payment. I also checked my credit report and there is nothing there. Even checked the loan database and all of my original loans show no default, paid through consolidation.
What am I missing? Is there a recommendation as to who to call first? The group that currently is managing the consolidated loans or ECMC?
Thank you!
Hi,
Can you give me info on who to contact to negotiate settlement on a federal collection debt please?
Hi, been reading all of the past posts with interest. I had I think two student loans back in the 80’s. One got paid off, one was in dispute with the college as I dropped out but not in time according to them. I defaulted (federal loan no clue what type) and never paid on it. Been about 20 plus years. Once a year I get a notice to my PO box about the debt but nothing more. I have been unemployed for a good many years, no wages to garnish at all, no assets. No loans or anything else on my credit reports. they haven’t reported anything on my credit reports either. I actually only owe for this one student loan, not other debt at all. Even my ss benefits in 20 years will only be $640 a month or so, i think too low for them to take from me from what i read.
I could just go on ignoring the one letter a year I guess till i pass away one day.
A close relative would like to pay off the loan since its the only thing I owe out there – doing me a favor. I think the original principle was 7,000 or so, I think 3k or so in interest and another 3k or so in whatever it is they call it – penalties. Not sure if i am considered a hardship case or not. I don’t have anything payroll wise for them to look at for years and I have nothing for them to take or garnish. Probably why they just leave me alone and just let the interest keep going. i have no phone and would be homeless if not for living with a relative for the past few years.
If i contact them to let them know cousin would like to pay off the loan for me, what can i expect from them? I take it if I could offer a lump payment it would be for 100% on the original loan plus some or all of the interest? I assume with a lump sum they will waiv the penalties? What about interest? Like i said I don’t work don’t have any money don’t have any payroll for them to garnish. They could take me to court but there isn’t anything to take. Will they waive some of the ineterst? Also if they waive anything, before I pay I guess I need to get it in writing that the loan will be paid in Full?
I realize what I should have done, again, I wasn’t in a place to do much for myself other than just barely get by. With regard to the being declared independent, I did not assume they considered someone independent on income alone and I was 18 when I started school & 19 when I moved out. There was jail time which ended about when I graduated high school which lead to violence (directed mostly toward me) after that, hence why I left home.
I owe around 25,000 with all of the separate loans. I paid cash for as much as I could of my tuition to not need the loans but I was in a dual degree program which typically takes 5 years.
Question for you all,
I was working full time and paying for school/living on my own. I was able to receive loans but couldn’t get any assistance due to my mother making too much money (I had attempted to petition to be considered independent, since I was, but didnt have the time with everything I was doing). The end of 2008 I was injured at work and spent all of 2009 trying to get better, trying to work but had to withdraw from school when I was put on heavy restrictions for 3 months following my back injury. The job I was at involved working with violent patients and I spent the next year between PT, doc appointments, work, etc. only to end up losing my job. I got depressed and ended up having to live with family and my loans went into default. I was never able to complete my degree and have struggled finding work I am qualified for that doesn’t involve the physical involvement of restraining or having to lift patients. I am now in a much better place and have been working part time for years (making awful money) but recently started working a full time job as well. I am working over 60 hours a week and making decent money and want to get my debt resolved. I realize I should have taken care of this or been in contact with them sooner but I really was just not in a place to be able to deal with things after dealing with a very permanent back injury and subsequently losing my dream job and everything I worked really really hard for from a young age. I am interested in doing a rehabilitation but the bulk of my loans are held by ACT not ECMC anymore. My question is, can I do the rehabilitation through ACT or is it too late for that? and I’ve read through these posts and Lynn you do appear to be very knowledgeable and I appreciate the time you take to answer these questions, however, I have to say the language on these websites is not very clear or as cut and dry as you say. While I may not have finished my dual degree, I do consider myself intelligent and find this entire process overwhelming and confusing. None of the borrower sites mention you can negotiate your collection fees for one. Things like that are what make me apprehensive to do anything without ALL of the facts first, because I would hate to end up paying more than I have to. There is no one to call to get an answer that takes into account MY best interests, not just with loan repayment but with balancing that with what other expense I have personally to survive. The manner in which debt collectors operate makes me not want to call them to discuss anything because everything feels like a trap. Guidance in terms of how to proceed with rehabilitation would be appreciated.
I went back to school as a married mother of 3 wanting to get my teaching degree. With me and my husbands income, we felt we would be able to afford the student loan payments and in the long run, we would be better off with me having my degree. Upon graduation, I applied for a deferment until I received a teaching job. Unfortunately, less than a year after my graduation, my husband was killed in a car accident and I was suddenly a single mother of 3 with enormous debt. Over the next 2 years, I struggled both mentally and financially. I consolidated my loans, deferred, and received a forbearance. In the end, my student loan ended up in default. When I finally received my first teaching job, they received a garnishment order and my superintendent gave me a number to call to try to help. When I called, we discussed the situation, and I was okay with them taking the money our of my paycheck, to ensure I didn’t forget or things didn’t get tight one month and me “opt out’ of paying. So, I thought I was more or less entering into a “agreeable” type of garnishment. I’m positive I was given information to make me believe this was a better situation than what I was already facing. Now, after 8 years of having every paycheck garnished and giving up 5 federal tax returns, I thought I would check to see how close I was to being paid off only to find out that I still owe more than I originally borrowed…quite a bit more. The collection costs are insane, which is what I thought I was avoiding when I ‘agreed’ to the garnishment. I realize that some of this is my fault, as I should have paid more attention along the way, but I seriously, naively believed I had made an agreement to pay….we even agreed on the amount that would be garnished….and just assumed I would receive word when I was paid off. Now I find out that that is will never happen. Never in my lifetime. I called to see what I had to do to get it out of default and was told I would have to pay $600 a month on top of the $300 I’m already paying for 9 months and then continue the $600 a month payments from now on. Now, I’m a school teacher at a very rural, very low-income school and $600 is nearly half of my take home pay. I simply cannot do it. Are there any alternatives out there? How can you pay on a loan for 8 years….whether through garnishment or not…..and come out worse than when you started? I would be eligible for some loan forgiveness due to my career field, but only if I get it out of default….which simply isn’t possible under the conditions given. This isn’t a matter of someone not wanting to pay money they owe….they’re wanting something I simply don’t have to give….especially when I have a 9 year old to house, feed, cloth, educate, etc. Is there ANY form of relief out there? Is there anything that can be done, or does the government just have to wait for me to die to make this go away? I mean I can continue to let them take the $300 garnishment every paycheck….as I no longer even miss it….and continue on this ridiculous endless path until one day I die and they get nothing more out of me…..but I was truly hoping to do something to make this right…..but my getting behind surely seems no more wrong than the ridiculous fees and collection costs that have been added to my debt making it impossible to pay.
Here is an interesting questions:
I had a loan balance of $58,408.00 on which I defaulted about 5 years ago. The loan was rehabilitated and a collection fee of 18.5% was added to the original balance. If I were in a position to write a check for the total outstanding balance do you think that I could negotiate an amount somewhere between the $58,408.00 original balance and the current balance? Does anyone have a similar story whereby a Federal Student Loan lender agreed to accept something less than what they are legally owed?
Hello,
I left the U.S. in 2005 and moved back to Europe, and never paid on my student loans. I recently moved back to the U.S. I ran my credit report and all my students loans are showing as closed, with a balance of $0, and a Date Reported of 12/2008. I’m questioning whether or not these accounts actually closed? There are a total of 8 closed accounts, and a lot of them do have recent history in the 81-Month Payment History summary (i.e. CA as recently as 2013).
I’m wondering when I file taxes in 2015 will that “alert” them I’m back? I’m currently working, but am a bit afraid if I try to remedy this I’ll open up Pandora’s box and will be hounded by collection agencies. It’s not clear who has my account, or what steps I ought to take to clear this up.
Any advice would be greatly appreciated. Thank you in advance.
Hello, question about rehabilitation. So a defaulted loan has a 20 something percent collection fee. After rehabilitation, is that fee lowered or is there an addition percentage added to the fees? Also, is there a way to erase, negotiate away, or make the agency validate these so called collection costs?
Do they give some ridiculous interest rate on the rehab? I would rather rehab, but I also want to save as much money as possible on interest and fees.
The loans are not private. I think they will settle because they have only been able to get a little money from me in the last 20 years. I move a lot and change jobs a lot because I am in the construction industry. And I can explain to them that if they don’t settle they will continue to get squat. My credit is excellent, but there is nothing on my credit but 2 credit cards with a low limit and no balance (no mortgage, no car loan) I pay cash for most everything because my credit was wrecked for so many years. I have access to the money to settle the principal and interest, but obviously I would rather not part with 20 grand in one chunk. If I rehab it will show up on my credit as a default, but then after 9 months the default will be removed from my credit, is that correct? So my credit will just be crappy for 9 months?
I have a defaulted student direct loan of $14000 with interest and collection fees about 24000. I have not paid in so long that it is not reported on my credit score. I actually have an excellent credit rating for a change. I came into enough money to pay a settlement of the principal + interest and feel confident that I could negotiate that. My concern is that when I pay off the settlement that they will report it to the credit agencies and then my credit will be screwed again. I think if I pay the settlement it will be much cheaper than rehabbing my loan, but I understand rehabbing would be better for my credit. Not to mention I wouldn’t have to shell out $20000 at once. What is better for my credit?
Robert – Were these private loans?
Lynn,
I Currently have a federal loan in default. The full balance to pay in full is $10,974.66. The CA has agreed to settle for a lump sum payment of $8,831. The money is coming as a direct gift from a financial resource that isn’t mine, as a one time gift, paid directly to the CA/DoE.. My kind benefactor has agreed to pay the entire amount to the CA (w/settlement terms agreed), but would prefer to negotiate for a lower amount. I am fearful that a settlement, as opposed to paying full amount, will have additional financial ramifications to the blow my credit will take for paying this off while in default. However, I am unaware of what these factor may be…
My question is how “paid in full” and “settled in full, for lesser amount” differ with regard to credit agencies, their reporting and scoring. Is there any difference? What are the major implications of each? How are they looked at by future creditors/lenders.
Thank you in advance for any advice you can offer and shedding light on the differences, which seem to be nuances to me.
I have like 3 more payments left until I will be done with the rehabilitation program for my student loans. I got like 4 Law firm letters in the mail from different companies stating my dock or case number about being sued or garnishment. Will they be able to do that and I’m still making my payments?
Sorry but I have to state to you that Marian I think had you pegged pretty well. Collection thousands upon thousands of huge interest is really not helping anyone out. In fact some have said they hope students default so they can collect the interest accrued. Furthermore, something you may not have considered but “LOVE” has everything to do with a caring grandmother for her grandaughter and its really NOT your place to tell her she is a no good grandmother just because she wishes to help eliminate a burden, its not your business to say what a family should do or not do for their loved ones. So ya your a “hard ass” . Unless you feel you need to have all the nitty gritty personal details of this Marian’s life, I dont blame her for not sharing all the why’s of her thoughts with you. Ya your a “hard ass”. By the way they say out there that for a repayment plan based on income they will want coming July 2014, they will want 15% of a persons gross income.. That is a very heafty amount especially since many folks are starving with degrees and all, never mind those without a degree that just went to take a few courses etc. THINK before you speak.. Have compassion as a human being and please stop being brainwashed by mainstream into thinking you are actually helping someone with their heart palpitations and threats given to the students across the US … Its very dramatic.. Its the only agency that is allowed to do extortion !!!!!!!!!!!!!!!!!!!!!! get it !!!
PS…. Most people would be happy to pay their loans if they were not harassed, threatened to be made homeless and YES I know even lawyers that are poor due to all the interest that MOST cannot ever think to pay off in their lifetime… Making children be homeless and making people lose their cars and stealing from the mouths of people is NOT the way to settle or come to an understanding to pay off such a ludicrous extortion fees of interest, never mind the collection costs. Many people have good intentions and are NOT criminals for being poor.. Because frankly the education system does let down and not deliver what is promised when many of these bright shining stars get out of school. Others didn’t finish, or couldn’t, or had a loved one to take care of, or became ill, or just plain never get paid what they are worth… I forgot!!! all federal workers now get 10.10 an hour while the rest of the country just eats rice crispies by the box full. No Lynn, your not very knowledgeable.
Hi,
I have a question. My boyfriend recently confessed to me he has not been paying his student loans for years. I was under the impression he did not have student loans. I have been forthcoming and honest about mine. (I have approximately $150,000 in student debt)
According to his credit report, his loans amount to approximately $33,000 and growing due to interest and fees. He has defaulted on them twice. He rehabbed them for awhile and then lost his job and defaulted again. All the research I am showing is that he can not rehab them a second time. Is there any exception to this? Is there anyway he can rehabilitate them? He’s been a public service worker for years. It’s very depressing that he didn’t make payments because at this point his loans would have been forgiven by various programs. Any advice anyone can offer would be great. I’d appreciate no judgment, or rude comments. I can think of all that on my own.
Thanks, Amanda
Lynn,
Consolidation is a trap for couples. I’ve a friend who’s been trying for years (AND was making minimum payments in between deferments after an acrimonious divorce. This link better explains her situation in detail but in short she consolidated $17k in student debt with her (now ex) husband’s $117k. He was ordered by the court to make the payments and claimed to be. She never received any notification as he was the primary, but has a $1k/month garnishment about which she’s told she’s “not entitled to any details because it’s not her account” (I’ve read the emails and sat with her through the phone calls because I couldn’t believe this could happen) but they’ve not gone after him for a dime AND issue him the tax form to write off all the payments SHE’S made each year. Media has begun to inquire regarding her story’s ridiculousness as she’s even consulted with attorneys who’ve said her “unique situation, albeit ridiculous and in violation of multiple rights and portions of her signed agreements” are ones that have been nearly impossible to litigate since her ex-husband is refusing to participate (why would he? She’s paying his debt & he gets all the tax benefit on an original total debt of $134k of which 17 was hers, that has now ballooned to $300k) and she’s paid $13k this past year on top of her previous payments, drives an old paid off car, pays ALL her bills on time, is a public school teacher with a master’s degree (& yes only had $17k she hadn’t personally covered). She’s not a deadbeat, but has been told it’s not her account but since they are ABLE to collect money from her (her ex, also a school teacher, jumps from school to school so because she’s responsible but not the primary on the account, she’s not allowed ANY information but should be made to pay the debt, no recourse for her ex AND he gets the tax benefit?). She’s offered to pay her portion and all fees in a lump to be separated from this, they even agreed that would be appropriate and may be willing to do so – but only if her ex agrees. Surprise – he never returned the paperwork. What can she do besides wait and hope for so much negative PR that a government official will pressure them to protect her rights? And even if that happens? What about the countless others going through the same?
Her story & petition here:
https://petitions.moveon.org/sign/asa-please-remove-me
Net is slightly under $6k.
Yes, I have received the 30 day notice and requested a hearing. Nothing is being garnished yet, and they have not even sent the letter to my employer yet. I have tried to convince them about the rehab numbers and how $890/month would not allow me to rehab the loan. The CA will not budge from that number. I spoke with the DRG and they basically agreed with me, but also said the CA has the right to enforce that amount as a voluntary payment.
At this point, I am just trying to hold off garnishment long enough for the consolidation to go through. I would rather rehab, but that looks like a lost cause.
Lynn,
Here’s a question (you’ve been very helpful to others).
I’ve been contacted about wage garnishment on my student loans. Total amount owed before collection fees is around $4,300. I have been attempting to work out a rehab. Unfortunately, since they are waiting to garnish, they want me to pay $890/month. That would not allow me to rehab (even with fees, I would pay this off in roughly 6 months).
I feel a bit trapped here and trying to negotiate the best route. At this point, I have put in my application for consolidation, but would prefer rehab if possible. Since they are at the stage just before garnishment, can they keep me to the $890/month for rehab ($890 is based on financial disclosure, and is also the amount of the garnishment if they proceed).
Lynn –
Thank you for the reply.
Brent
This question is for Lynn C:
My consolidated loan totals $16,532. That is $11,229 in Principal + $2,075 in Interest + $3,228 in Fees.
What would a reasonable and successful cash offer be to ECMC on the above? I want to pay this off.
Thanks, Brent
I have a student loan in default for 12 years . I have been unemployed and starting working about 4 years now. When i log on to Department of Education website it says i been assigned to a CA but DOE has also a my total balance owe which is 8,500(Principle and interest). I have been paying my balance off by my tax offset each year. I check to see where my tax offset is going to DOE to my balance. I check the payment history and looks like they are charges to me a total 3,074. Does my total balance with DOE have collection fees added to my interest.? Are collection fees charge one time fee or is it charge every month, over the years? Do you think i owe more then 8,500.00? I know i should call the CA but is not in option right now
Lynn, Thank you for the quick answer. I will ask for a settlement…thanks for that advice. On the collection charges, I must be missing something. The column that that shows amounts at setup shows over $8,000.00 in other charges which was added to principle bringing the loan to over $50,000.00. Then The current amounts shows other charges as over $9,000.00 which equals 18.5% of the setup total minus other charges I’ve paid. The rehab agreement states that “Collection costs and unpaid accrued interest will be capitalized (added to principal) at the time of the rehabilitation sale to the lender. You will be obligated to pay the new principal balance with all capitalized costs.” This represents over 25,500. in capitalized “costs”. I realize there are heavy consequences to being in default, I just don’t want to pay more that I have to.
If this is correct please tell me how it represents just one addition of collection costs. Also, if this is correct, which collection costs are they likely to waive. Thanks for helping out on this. I find it confusing.
Hi Lynn,
My loan is in Garnishment with Windham Professionals. I am ready to pay off the entire amount and did get the payment history as you suggested elsewhere. My question is, when I was talking to the rep regarding payoff he suggested rehab and said there would be no further collection fees added because when I entered rehab it would be out of collections. I specifically asked about additional charges when the loan was sold and he told me there were none. When he sent me the rehab agreement it shows that at the time of setup, which I assume is when they took over collections, there were collection fees added. To go into rehab they want to add .over 24% of other charges on a lower principle balance. and the rehab agreement states there will be an additional 18.5% added to the principle upon sale. This means that collection charges will be added three times. It was my understanding they could be added once on consolidation and once upon completing rehab. Am I wrong?
I would still like to pay it off. Can I do this since I am still in default? They have taken one payment from my account but I have not signed the rehab agreement papers.
Thank you.
Hi,
Glad I found this site. I need some help. Today I received (was left at my home unsigned for) a court summons for a defaulted Perkins Loan. I just recently had received a disability discharge and found that this one loan (the Perkins) was not covered in the disability discharge. Prior to receiving this court summons I have not received any phone calls nor nothing in the mail from any collection agency. I really thought it would be included in my discharge. So as of today for a $2,000 loan I owe 5% interest (since 2006) plus legal fees of approximately $1,600. I only receive social security disability. Yes, I am married and my husband and I share a checking account but it’s for bill paying purposes only. Our money is separate. We do not share financial responsibilities outside of household expenses. What’s his is his and what’s mine is mine.
The summons for court gives me sixty days to respond as I do not live in the same state it is being served. I really do not have a clue what to do here. Should I contact the school that the original Perkins Loan was given? Should I contact the attorney on the paperwork? Should I seek my own legal representation? I feel yes in part I know it was a bit my responsibility I did take this loan. I really did believe it would be included as part of the disability discharge. Shouldn’t I have received some kind of phone call or something in the mail letting me know I owed still? I just received my discharge in August. I lost my father and was grieving extremely heavy and didn’t really pay much mind to anything. I’m still surprised I didn’t get anything by mail or phone. I guess what I want to know is what should be my next course of action? What should I do to resolve this or who should I contact? Do you think they would work with me on the interest and legal fees? Thank you in advance for any help.
Thanks Lynn. Of course your right.
Hello,
I asked a question some time ago, and I didn’t get a direct answer. I just wanted to follow up to see if you could offer some assistance. I owe a huge loan amount – $102,000 (after added collection fees) and my wages are currently being garnished at 15% which makes my monthly payment roughly $400.00. I am newly married and we have filed our taxes jointly; however this student loan debt is mine alone. Together we make $86,000.00. I wanted to know if I consolidate my loans if my monthly payment would go down or if I should just leave the garnishment in place.
Tera – Wage garnishment is typically going to result from a court judgment being enforced. The time to consolidate your student loans and get a lower payment is before being sued. Once a judgment is in place, and your wages are being garnished, you generally have to look to the court, and whether your income and expenses meet state limits, to qualify for either partial or full wage exemption.
Edit to add: Above applies to private loans.
My understanding its 18 to-24% of your outstanding balance?
How will that work in my situation ? In 2013 my outstanding balance was 12,000, DOE garnish my tax refund of 4000. As of 2/7/14 my balance is 8,000. My question will collection apply 18-24% of your highest balance or 18-24% of balance as of today? For example if collection will call me today.
I have been in default since 2001. My total balance of my student loan was 12,000. Last year Department of Education took my federal income tax of 4,000. I log on to my account @ DOE and it says 4000 went to my interest. As of 2/7/14 I have a total balance of 8,000, which 5000.00 is the principle and 3000.00 is the interest. My question is do i owe more then my total balance because of collection fees. ? Should i expexct DOE to take more then my total balance?
Mp – Yes, the collection fees are a monster on default student loans. Are you expecting more than a 5k tax refund? What prevented you from rehabilitating the loan for this long?
Hi Michael,
No im not expecting more than 5k tax refund more like 4k. I was just planning to use my tax offset to pay off my balance. My principle and interest. Im been in default for 14 years. I was unemployed for almost 10 years. I been employed for almost 4 years now. Im afraid to call the collection agency and they sart garnising my wages i live paychechek to paycheck. I cant afford another monthly payment on my budget. I rather have them take my tax refund
each year.
How do they calculate collection fees?
What do you think my balance would amount to with collection fees?
Do you think its a good ideal to just pay off my balance with my tax offset?
I dont what to do NEED SOME ADVICE ?
We are in the process of rehabbing my husband’s student loan that was sold to a collection agency. If we make 9 consecutive payments it will be out of default and back in the hands of the Department of Education. My question is, is any of the amount we are paying considered tax deductible student loan interest? Or does it not qualify since it is still in the hands of the collection agency?
Be careful, very careful of ECMC – they are an arm of Ed Financial who lies and refuses to work with borrower, use predatory and threatening tactics. They should have a “class action” against them.
Hi Lynn, I have question about Direct Consolidation Loans as you seem to recommend them. I was wondering when the correct time to apply with them would be. I have just made my first payment on the 9 month Loan Rehabilitation Program. ECMC is my lender, ACT is my Collections Account. I was under the impression from ACT that what happens is; after you pay the 9 months successfully, the loan gets sold/sent back to your original lender or another lender, and it is there that you have the option to enter into an Income Based Repayment Plan. They (ACT) never mentioned anything about Direct Consolidation Loans, or that I had to move my loan there in order to be eligible for the IBP. Would one have to take a specific action at a specific time in order to move one’s loan to Direct Consolidation Loans in order to enroll into the IBP? Any clarification would be helpful. Thank you in advance for your help!
My loan is in rehabilitation status, I have made 2 payments already and will continue to as I promised. Why is Sallie Mae calling me and someone else manage my loans?
They violated the law by other actions including but not limited to failing to report payments to the DOE, threatening to charge me with a federal crime because of a computer problem on their end (which I had an affidavit from my financial institute proving), and telling me that I could be jailed for not answering their phone calls. These are just a few of the items for which they were fined by the FTC. I wasted no one’s time but my own and yes I want something in writing this time to protect myself from these people.
I’ve been trying to get my student loans rehabilitated. The last CA refused to send me anything in writing even though I was paying over $500 per month. I ended up filing a complaint against that company with the FTC and State Attorney’s office for fraudulent business practice and violation of federal law. The DOE has assigned another company to my account. How do I get them to send me something in writing?
I borrowed 11,ooo in the 90’s. I couldn’t repay it when I got my first job out of college, making only 200 a week. The loans were bought and sold over the years and I now “owe” over 170,000. I believed the student loan companies when they told me to consolidate several years ago. Essentially what happened legally is that my signature on the consolidation wiped out the 11,000 original loan amound and made it over 50,000. Now it looks like I originally borrowed 50k, which is not the case. Why should I believe or trust anything these companies tell me? They are sneaky, and my experience has been that they lie and use horrible tactics to try and get you to do what benefits them and their numbers.
I too am willing to pay the original loan amount plus REASONABLE interest. What happens if I sign the “reasonable and affordable” paperwork? Legally, what will that mean? I am “uncollectable” according to the IRS. And right now that is true. But, even if I had a million dollars, I WOULD NOT PAY what they want, I would fight it in court and start a class action lawsuit to get something changed so future borrowers don’t find themselves in my situation.
Please don’t get me wrong, I am taking responsibility and I am not portraying myself as a victim, however, I do feel powerless. I am looking at my part in the situation, and trying to deal with it. I see I am not alone.
Any help or experience is greatly appreciated.
My new wife has old loan that she has ignored for many years. Basically no ability to pay and didn’t know how to handle. Loan is assigned to Progressive Financial. Principal is 60k, Interest 37k and fees and costs 23k in round numbers. She makes about 35k per year and has two children. Seems her best plan is to rehab and then seek an alternative payment plan. Ideally an IBP. The Progressive notice shows that DOE is the current creditor. Any estimate of what the monthly payment would be for 9 months to rehab the loan. Is there a better approach. Thanks for any insight and reference material to help me help her figure this out.
I’m sure I received a letter, but I stopped opening them because I assumed they were all the same, and I really didn’t take garnishment seriously because it hadn’t happened and I assumed it wasn’t going to happen. I know what all of my assumptions makes me look like, but now that I see they aren’t kidding, I need to get my act together as well.
Hope is way better than nothing. I will take what I can get.
Thanks Lynn.
Lynn,
I have been reading through the posts and I like how direct you are and the fact that you will not allow anyone to play the victim. Here is my victimless situation:
I have several loans totaling $110K that I have defaulted on, the original loan amount is $83K but with interest and collection fees – well that is the number now. I made the wrong choice not to pay, defer, consolidate or even care about taking care of these loans. Now I don’t have a choice, my wages are set to be garnished in the very near future (my payroll department is starting the paperwork that they received on Friday). Essentially, with garnishment my monthly payment will be $400.00 and I don’t think that is a bad deal for the loan balance – and I am in the position where I want to start paying these loans, but I don’t know which would be the better option. With my expenses I can really only afford to pay about $250.00 month, I make $45,000yr, and I can pay the $400.00 month (I have no choice), but that would leave me with no extra money and that would mean that absolutely nothing can happen in my life that would require money. I know there are other options, but I don’t think that between consolidation or rehabilitation that my payments would ever equal to $250.00 month. So basically I think my best option is just to continue to allow them to garnish my wages – is that a bad choice?
Thank you for your feedback,
Tera
One final question, what amount of loans would cause them to sue for garnishment if you only get 730 disability a month or to try take your vehicle, an old one that is your only means of getting to a Dr. or ER.
On my question, please post the answer on here. Thank you.
I do have a question that could benefit a lot of people since these things are not clear to most. Is a NDSL Loan a Perkins Loan and is that loan one that once you pay 9 months of payments you can then transfer to the Income Based Payment I am now hearing of. From what I now understand a Stafford Loan can qualify for IBR, but am unsure if a loan that is NDSL can be put under Income Based Repayment Plan. And I have no desire to contact them over the phone and have them claim I made a payment arrangement when all I want to is to know what type of loan I have and how much I owe- no promises on anything from me, because I am disabled and do not have any money to pay for anything. Can not even afford to buy clothes or go to the dentist. So, being on IBR would be my only choice. And I earn only 739 now for disability with ssi so am very concerned if they should try to garnish- all this over two 2500 loans from the 80s. Heaven only knows how much interest those loans had. Wish I had known I was going to become disabled at a young age so I could not have taken those loans. And no most 18 year olds do not read the print. Youth and most young people pay little attention to the fine print. So, can all Stafford loans go under IBR- and is NDSL Loan a Perkins Loan and is it able to go under a IBR- once you pay the monthly payments to bring it from default. Because I am thinking maybe I could borrow a small loan to pay the loans for 9 months from a relative, do not know for sure, but would try if I knew there was a way to put both loans under IBR. If they had processed my disability discharge it would have ended. And if they had ever when I was young told me I qualified for IBR for having no income due to illness I would have done that too and then 25 years the balance would have been forgiven by now.
Thanks Lynn.
These were “Direct Stafford Loans” (the ones from 2006/7) and “Stafford Loans” (from 2005) so from what you indicate the 20%+ fees would be waived on the “Direct” and reduced (max 18.5%) on the others?
I assume that the Direct Stafford are the same as the Direct Ford loans.
We have been working with the offices of one of the school and they have advised us to submit a letter of appeal which we have done; we are in process with the other school also working with their processes. The leverage here (little as it might be) is that the schools are concerned about students being successful – not to discount personal responsibility – but that they will be hurt by having too many such situations.
I appreciate your input and assitance. We are also going to do submit applications to cancel / discharge the loans to the lender. I do not have undue expectations about success here; however, we are going to negotiate all that we can in order to come up with a final # before we make the commitment.
I agree with personal responsibility – and feel that it is also lacking on the lender side and the academic side in terms of assessing risk. My take is that growth of student debt and default to the levels it is today is not solely the fault of the student but is also due to an environment that makes the availability of the money too easy.
Again, many thanks!
By the way – I just had a conversation with DOE and they indicated:
Collection fees are waived upon completion of the 10 month rehabilitation period
Credit record is NOT wiped clean (i.e., DOE wipes their mark but the lender does not). This is a little unclear for me since I believe some of the loans (i.e., direct?) are direct from the DOE and others are through secondary lenders?
Forgiveness after xx years. Once the loan is rehab’d and transferred to another lender then it is back in normal status, payment is re-negotiated and normal forgiveness rules apply (i.e., if it’s not paid off in 25 years it’s forgiven, etc).
They are sending me a package explaining Rehab AND sending me an “Unpaid Refund Discharge” form as regards periods of time / classes that we want to request cancel / discharge of the loan amounts for. 10 – 14 days to receive and then we’ll see.
Also talked to the CA and they are supposed to be sending me some Rehab T’s and C’s based on a letter I faxed to them (only ACT would agree to this – not ECMC). However, they already advised me that it will not say anything about collection fees, etc.
It is insane. Completely insane. Enter into a legal process and no clear T’s and C’s. Maybe it’s because it’s the government running the show?
I’m trying to advise my son regarding about $28K in loan defaults from 2005 forward. Medical extenuating circumstances abound: Drug addiction / Substance abuse including arrest and inhouse rehab, methadone program, under the care of a clinical psychiatrist and psychologist, hospitalization for lung issues, long recovery period, and unemployability. My position is that the lending agencies and the schools did not recognize that he was high risk. I.e., he never should have been lent the money and his Academic Advisors, Teachers and Financial Aid Advisors should have been intervening. $28K and little to nothing in value as a result.
We are working together with the collection agencies (two of them – ECMC and ACT) and are also doing appeals to the two schools for refunds of tuition and fees.
I’m concerned that the collection agencies WILL NOT provide me with clear terms and conditions of the rehabilitation programs (my position is that if he is going to enter into a contract then we need to see the T’s and C’s up front). For instance I can’t find crisp statements concerning whether the collection fees are waived or reduced, what happens if they can’t sell the loan at the end of the 9 month rehab, if they do sell what happens to the payment schedule, is there a “forgiveness” period – i.e., that after 20 or 25 years of payments the loan is forgiven if there is an outstanding balance.
Also I’m considering starting up a negotiation with them for a lump sum settlement if it can help my son get out from under the huge collection fees.
Can you give me your thoughts?
I’ve spent countless hours on the phone with the collectors and they have been very professional and patient and frankly very sympathetic. But they have not been able to advise me crisply and precisely it seems. Maybe I am asking for too much.
Thank you Lynn. That was the same thing I was thinking about the phone calls. When I refused to give them my family members or even friend’s numbers they just called out 2 people that I gave when I applied for the loan.
Actually I would rather pay it all off than to deal with the phone calls. I wouldn’t give them my worst enemy their phone number, it’s just that bad.
I owe the Department of Education was originally $8,000. Now since they have sold it to Conserv Collection Agency it is now $11,000. I am not disputing that because DOE said they will charge interest and all of that. How I chose to pay it all off is to just withdraw from my 401k? I set up a payment plan with Conserv to where they would take out $137.00 a month. It would have been more expensive than that until they asked me if I could start paying sooner. I agreed and now they will take from my account. It is called a rehabilitation program. I don’t want them to take from my account every month so, I just want to pay it off and have it taken out of my check through a 401k loan that will be coming back to me. I know that I will lose money but atleast it will be for something that I owe anyway. My question is, is there any way that I can just wait to settle it and save a little money or just do it the way I was thinking? My 401 company will give me 30 days to decide. I guess in the mean time allow them to take money from my account? I just want the calls to stop. I have changed my number from DOE, the collection agency won’t tell me how they got my number. I guess with my SSN but my phone provider don’t have my SSN, there was no contract to sign….
Sabrina – You already recognize the costs associated with taking a loan out from your 401k. One benefit of taking the loan is that you are paying yourself back with interest (that interest replaces – in a way – what that money taken out would have been doing for your retirement account). There are several reasons to avoid tapping into the 401k like this. One I will point out here is that, should you leave that job, the loan may become payable. Do you have a secure job?
You cannot settle federally backed student loans like you can other unsecured debts (like credit cards), or even how private student loans can sometimes be settled.
Questions:
What are the interest rates on your loans?
Have you ever consolidated them in the past?
How long have you been making your loan rehab payments to Conserv?
What is the reasoning for not wanting the 137.00 payment plan?
Collectors have different ways to access information about you. My questions is why they are calling to try to collect when you are already working with them, and making rehabilitation payments?
It doesn’t show in this letter my interest rates are. They sent me a letter before but I threw it away. I think they verbally told me on the phone but I wasn’t paying attention.
I have never consolidated with them in the past, this is my first consolidation.
Today is the day that they will start taking out payments so, I will start today…every month for 9 months.
I have a steady job, but it is part-time and sometimes we are busy and sometimes not. I’m scared that maybe there is a quarter to where we are slow and they take from my account and I won’t have enough to pay my rent.
Hi Lynn, Thank you for the fast response I am scared since I’ve never been in collection or been threaten before. Should I offer 6500 since I get paid this coming week? Sorry for the question again.
Hi Lynn, I have a few questions maybe you can help. I just received a letter from ECMC saying they are going to garnish my wages in 30 days. I owe total $8854 I have 6000 cash on me from death of family member. Before I call them I wanted to ask if ECMC will negotiate for 6000 to pay off the loan or should I make the monthly payment they are going to set up for me? Sorry I’m asking so much questions my parents use to pay it for me until I joined the Marines so I was clueless about the loan until I got the letter. Please let me know any advice you have.
Hi Paula, thank you for your service first and foremost. I know you posted this a while ago, but I wanted to chime in with my 2 cents. You can negotiate a federal loan settlement with ECMC, although it can be difficult. There are also ways to get out of a federal loan garnishment (the best option being 5 months of Rehabilitation payments) so you may want to look into that if they have already started garnishing wages. Usually settlements with ECMC result in some of the accrued interest being reduced, but occasionally I have seen part of the principal amount forgiven in settlement also.
Hi, Lynn I have questions, I took a loan from wellsfargo (30K) the loan went into default in 2010 I paid in monthly payments last year about 11K to Primary Financial (collection company) the ending balance was around 23K, but they never call me again to set up more payments and I never call them either, I have not received any calls or letters or anything, I live in Texas and I know there is no wage garnishes here, and I know about the Statue of Limitations which in my state is 4 years that would be 2014, how does the SOL works because I talk to the collection company in 2012 and made payments, does that reinstate the SOL automatically, because I read that it doesn’t? If so, if I own about 23K could I get sue? is there a minimum amount to take someone into a civil case? I checked also my credit report and the account’s status is closed and the 30K was written-off as soon as I defaulted in 2010, what does that mean?
It sounds like this is a private loan. SOL issues vary greatly state by state, but usually by making a payment that does “restart the clock’.
The credit report showing $30k written off in 2010 is most likely the balance at the time of the default/charge-off, but due to interest and late fees, that amount can increase after the charge-off date.
Since this is a private student loan, you could probably settle it for less than 50%; but Wells Fargo is one of the least aggressive private student loan lenders, so it might make sense to continue to wait it out and see if they try to do anything. If not, you may be able to wait until it falls off your credit report and/or goes past the SOL in your state.
Wow this forum is awesome. So I have old college loans (since the 80’s) that caught up with me several years ago. ECMC sold my loan to Premier Credit, which has garnished my wages apprx $10k over the last 3 years, and also garnished my tax returns (which I’ve only occasionally filed). Last year I got SOBER, which completely changed my outlook on everything, including my finances. Today, I learned that my wages were no longer being garnished from Premier Credit, and my balance is back with ECMC. Because it is new, it is still in ‘pending’ status, they want me to call them back in 48
hours to discuss the status and remaining balance (apprx $12k). I want and need to deal with this as honestly and with as much clarity as possible, but does anyone have any suggestions on dealing with ECMC? I don’t want an easy way out (I’ve been doing that way too long!), but I would like to know my options. Lynn C seems very knowledgeable about such things. Thank you.
It can be possible to settle federal loans with ECMC that have not been paid in a while, mainly for a reduction in interest accrued; but occasionally for a reduction in principal as well.
Hi all, Thanks for all this good information. So, if I have my wages garnished, after 9 months they will lift the default and I can then negotiate for a settlement amount or apply at that time for this government service program. Is that right? Will I be able to negotiate away the penalties and interest? Who is ECMC? I’ve never heard of that organization nor do I know how to contact them. I know I have paid in $21,000. Thanks again for your help and later.
Apparently ECMC plays a shell game with several collection agents so they are able to dodge you and keep you in default. You will know who they are if you stop your wages from being garnished but they will disappear again. I’m sure if you paid $21k, it won’t likely show up on their records because every nine months they switch collections agent and charge you up to 25% of your loan balance making it a game that you cannot win. Eventually the Department of Education and Department of Justice will catch up with them but not before they destroy peoples lives all because they have been given the authority to but not because it’s right. The laws favor you if you are very poor or very rich but if you are middle class with a job guess what – your kids will not be able to go to school because you will still be paying for yours.
Lynn, working on it .. Like I said they are hard to get a hold of while they are taking your money. I will send you the info when received if you want to be wrong but I’m sure a JD from Canada with a chip on his shoulder is never wrong especially when helping children apply for financial aid. Let me know where I can send the info . Why don’t you put you education to use and help people get out of this situation – does it make you feel better just to ridicule them.
You would want to do 5 months of payments on the Rehabilitation to stop the garnishment. If you do the full 9 payments, that should bring the account current, and some collection agencies also remove the default fees at the end of “Rehab”, but you’d want to check with them first.
Wow–With friends like Lynn C, you sure don’t need any enemies. I have very successfully completed the default program for my granddaughter and am proud of it. And I received very good treatment from the rep, for which I have expressed my sincere appreciation. My granddaughter is NOT getting a free ride, but even if she is, what does Lynn C care? I think these so-called “experts” won’t be satisfied until they rip all your teeth out through your nostrils just in case you might be hiding a gold filling in there somewhere.
However, Lynn is correct in that you MUST complete the rehab program and get out of default before you can negotiate, but if you can get a good knowledgeable rep to explain that process to you, the default can be lifted after 9 months. I forgot to mention that fact in my last post for which I apologize, but contrary to Lynn’s low opinion of me and my efforts, I’ve got a lot more than a clue, not only about student loans, but a whole lot more as well. Until I got involved, my granddaughter and her mother had given up on ever getting the info they needed to get her out of default, so I know what you young people are going through. And by the way, Lynn’s disparaging remarks about me are a bit like being called ugly by a frog. I am not impressed.
Lynn C.: You know you are really quite hostile to all of us trying to come to grips with our situation. I don’t think your attitude is at all helpful. However you are very informed and so, since no one else is responding to my questions except for at this site, I have to say that you’re not quite correct regarding Marion’s situation. I have been told by a Dept. of Ed Ombudsman that I should apply for the civil servant program even though I am in a garnishment action. I would rather pay off the loan now and not be in a 10 year program but I can’t seem to get anyone to talk to me about that proposal. Also I think that by not allowing you to make a payoff it is a de facto pre-payment penalty and I don’t believe my promissory note addressed that type of action. What do you think?
Hi, I think it would be a good idea to stop the garnishment via Rehabilitation payments, and then you can apply for a variety of different payment plans.
Steve Rhode has a great guide on how to stop garnishments here: https://getoutofdebt.org/63335/easiest-way-stop-student-loan-wage-garnishment-loan-rehabilitation
John, I have NOT worked as a collector or am not an expert at anything. However, I have dealt with the same people you are dealing with now. I now have my granddaughter out of default and will be negotiating with the new collection company very soon (they sell these loans to different collection agencies every year). Best advice: 1, Call the current collection company and keep calling until you get someone who will listen to what you are saying, which may take a week or so. 2. Be extremely nice to that rep–there aren’t many of them who give a rip. 3. Go here: https://www.nslds.ed.gov/nslds_SA/SaFinLoginPage.do (your login page) to find out what you really owe to whom and how much interest and fees are tacked on. 4. Get back to the nice rep and find out what your options for repayment are. You can also find these options on the internet 5. Try for the best settlement you can work out and decide on a method of payment which is best for you.
This takes a lot of time and patience which most young people do not have because of other constraints, such as working, eating, sleeping, etc. Most people are not interested in helping you, but one thing to remember. These people get paid for results, so if you can find one who has even a smidgen of humanity, stay with him/her and thank them profusely for whatever information you can glean from them. Keep in touch with that rep but verify–verify–verify! I feel sure there is more that I could tell you, but these are the basics. Good luck.
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?.