I am impressed by this forum and I hope some of you knowledgeable people can help me out. I'm writing on behalf of a friend who has a student loan in default (FFEL student loan). The total amount owed is mostly interest (about 75% interest, 25% principal) and the loan was taken out at least 15 years ago. He has no assets or property and very little income, but a CA pressured him by phone to agree to a rehabilitation plan at a certain amount per month (over $200). He cannot afford this amount and offered a lower one, but they told him that it was the absolute lowest they could go, and that if he didn't do it, the interest would be capitalized and the total would increase rapidly until it was beyond $50,000 at which point he would be in serious trouble. He really wants to pay it off and be in good standing, but the requested amount is too much for him. Unfortunately, he gave them his checking account number to start automatic debits. This just happened a few days ago and I don't know if they have started withdrawing money (or, if the have, whether they withdrew the agreed-upon amount). The phone call was misleading: the rehabilitation agreement letter that he received a few days later says that IF he signs the rehabilitation agreement letter, THEN the interest gets capitalized by the lender. So, I take that to mean that the threat of capitalization does not apply unless he signs the letter. Does this interpretation seem correct? He has not signed the letter yet. The letter also says that once the rehabilitation is complete, the payment amount to the new lender may increase. I'm thinking that rehabilitation doesn't seem like a good option for him because of these 2 things - he won't be able to sustain the payments at this rate or at a higher one, and capitalization seems like a really bad thing because the principal is such a small part of the total amount owed. He is not in a better position to pay it now than he was for the last 15 years. Of course he would like to be out of default but he is not trying to buy anything so improving his credit rating is not an immediate concern. What do you think about this - do you agree that rehabilitation might be a bad idea for him? What do you see as the pros and cons? What is he obligated to do based on the phone call if he hasn't yet signed the agreement? How would he rescind oral permission to debit $240 per month? Another issue: the CA has almost 300 complaints against them on Better Business Bureau and their rating is "unsatisfactory"! Is there any way to get a different CA for this loan? Any thoughts you have about this would be very welcome. Thank you.
I'd say that based on the fact that the loan is 15 years old he should not pay it or pay any part of it nor agree to anything. He is likely to get several bounced check charges unless he puts a stop pay on the e-check he authorized. Don't worry about restarting the SOL because there isn't one for student loans. Of course, he won't ever get any refund checks from the IRS if that worries him at all. Student loan will grab those every time. He should demand that the collection agency validate the debt immediately. That can gain him a lot more time and mileage than a demand for validation on a normal debt will. It is likely to get that collection agency off his back forever but if it does he will get a new collection agency in a few months and he can start the process all over again. If he is lucky he can play that game forever. If not then he can get sued and end up with a garnishment. That will ruin any plans he has for retirement because although he might someday get a pension he won't ever actually get it until the debt is paid off with his SS checks. I have read somewhere on the net that many of those old student loans are now uncollectable due to changes in the law that have taken place over the years but I can't confirm that so until confirmed by a reliable source that has to be treated as a rumor and not relied upon. Other than that, I can't say more.
Thank you, cap1sucks! I will try to learn more about demanding validation. I'm assuming that it should be done by certified mail with return receipt requested (based on other forum posts). Does anyone have information about whether old student loans are still collectable, or know where to get this information? Is this a question for a lawyer, or are there websites or public interest groups that could help? The loan is definitely over 15 years old, and possibly 20 or 25 years old. Thanks.
Yes, but demand for validation is so simple a child could probably figure it out. All you really have to say is that you demand full and complete accounting of the debt and that you dispute each and every part of it. Anything else you find in the untold numbers of sample letters on the internet are just people's ideas of what might constitute good embellishments. Most of it that you find on the internet is just pure nonsense. People seem to think that it makes them look smart or dangerous or something but it really don't. Old student loans are really worse than rattlesnakes. Rattlesnakes die after a few years but student loans have the potential to bite you until the day you start taking your dirt nap. If you leave any assets they can grab they just might do that too. Potentially it is still collectable no matter how old it might be. Will they collect it that old? Nobody can tell you that for sure. On the other hand the older it gets the less likely it is they will try to collect it.
I rehabbed I will say this - I rehabbed one of my student loans - and it was a huge relief for me because they took the 'in default' of my report .I think I only had to pay ontime for a year for that to happen....I want to say they stretched me to a bigger payment then I could afford to(250.00 which at that time felt like alot)....But I stuck with it, of all my bills I made sure that one got paid first... IF he did rehab - the only way I would do it is if I dealt with the department of eduction directly.....Thats what I did - I bypassed the collection agency that was harrassing me. This was along time ago - but this is what I can remember about it anyway
