I am wanting to pay off a defaulted loan. Of course it is w/ a collection agency...a month ago I asked the agency to approach the lender with my payoff offer. I was told that they weren't even going to send the offer letter b/c they knew the lender would say no. I asked for this in writing & was told "no" - they want me to enter into a repayment program...I am so mad @ myself for #@!$% up my financial life - but will pay this off as best as I can. I can't understand how the collection agency can deny my request to provide written proof that they know the lender isn't interested in my payoff offer. I'm exhausted trying to research & understand my so-called rights. Has anybody run up against this wall???
why don't you just talk to the original creditor. I would make an offer to them before messing with the coll. agency. Coll. agencies take 50% of your payment for themselves...
That's the thing- there isn't a "creditor", there is a lender/guarantee agency & they tell me that I have to deal with the collection agency per the contract they have with them.
Tell the collection agency that you want to REHAB the loan. This will remove all negative entries associated with this loan from your credit report. You will need to make 12 monthly ON TIME payments in order for the negative marks to vanish, but it can be done. Don't settle the loan, just rehab.
I would have to agree with Erica. I rehabed 15K in student loans about 2 years ago. Today, the default notations have been removed and it looks like the loans were ALWAYS current. Don't settle, contact your guarantor and tell them you want to rehab the loan. Don't mention settlement, if you do you will be stuck with the late notations ect.
Terry, I agree with your last statement. From personal experience, I consolidated before rehabbing. I was desperate to return to school and couldn't get any aid until they were paid off. I now have some negative entries associated with the original student loans, but positive consolidated loans. Student Loans are the worst to get removed too, because the account number is your social security number. BANG-verified.
Terry, Were you able to REHAB the loan through the lender versus the collection agency? The collection agency suggested REHAB, the amount I owe-including their collection costs...I'm not so much concerned about the marks against my credit as much as a $9000 loan consolidated back in '94, turned into a $13,000 debt & now is @ $26,000. I want to avoid having to pay one more nickel on this - especially to the CA. Ugh.
Is this a student loan? Collection fees are capped... www.ed.gov search for the Higher Education Act, Sections on Rehab Loans and Collection Fees
You will have to pay the collection agency, who in turn pays the guarantor (lender). There's really no way around that, as the Dept. of Education allows the collection agency to earn 18.5% of the defaulted loan, as part of a rehabilitation program. After the loan is rehabilitated, the interest on the loan *and* the collection costs on the loan will be "capitalized" or added to the original principle to create a new, higher amount priniciple. This is the cost of rehabilitation. If you don't want to see the principle go up, you do have the choice to consolidate the loan - after three on time payments. You will not incur the higher principle, since they will not capitalize the interest and collection costs onto the loan. BUT, you will not see this loan or the bad marks come off of your credit report. It will be listed as a "paid collection" and all of the 90+ day late notations will remain. I chose to do rehabilitation because my credit report affects my ability to get a home/car loan with lower interest rates, and I wanted my credit report to be in the best shape possible to save me thousands of dollars in my lifetime. For me, the capitalization into a higher principle was worth it (I call it tuition in the school of "learning how to be financially responsible"). You'll have to think through what is more important to you. Saved money now through consolidation or saved money later through rehabilitation and a clean credit report. Whether you choose to rehabilitate or consolidate - for the next three to twelve months (depending on the course of action you take) - you will HAVE to pay the collection agency. If you ask for a consolidation packet from Direct Loans (http://www.ed.gov/directloan/), you can read more about rehabilitation v. consolidation. This is another great site as well. Read through the entire section on student loans to gather more information. http://www.carreonandassociates.com/sl.htm Best wishes in your decision,
Bkev: Does this 18.5% collection fee apply to all student loans or just government loans? My son had a Plato student loan through Wells Fargo. The collection agency hit us up for "attorney fees" in the amount of $2,000 for a $5,000 loan, about 40%. This was about one week after it went into default (it was 3 months late - they had told us no payments were due while he was waiting for a decision on his request for an extension). I wish I knew about this board then. I feel confident they had not yet spoken to an attorney so any attorney fee was bogus. I cosigned. Wells Fargo has a very strict policy. They will not inform the cosigner of a default. They say it is a breech of trust with the original borrower.
I just looked at the posts again. It was Marci who mentioned the 18.5% so I guess my question is directed to her.
Tom, I don't know for sure, but I suspect this fee applies to government guaranteed loans only, since the rehabilitation applies to government guaranteed loans only. If you are unsure, call 1-800-4FEDAID and ask whether private bank loans are regulated by any collection fee caps. Also, "Mozilla" on this board just successfully litigated and won against a guarantor based on their overcharging him on collection fees (so, even my 18.5% fee may be up in the air as well). I suggest that you do a search for him or start a thread directed to him to find out more.
