I just learned that my SLs were in default and have been turned over to a CA. I am interested in rehabbing them, and dicussed this with the CA. They told me that I had to make 12 on-time payments which were calculated based on a 10 year payoff. Also, I will need to pay a very large "down payment" in addition to the 12 monthly payments. Does the CA have to follow the same "reasonable and affordable" guidelines when determining my monthly payment? The payment they want is 33% of my net income, and there is no way I can make 12 consecutive payments at that amount. Also, can they require a down payment? I have researched this and I have found no mention of a down payment being required to rehabilitate a loan. PLEASE HELP!!!!
I've also never heard of a down payment being required for a student loan rehab. I don't think they can require it. Try doing a search here for HEA or Higher Education Act to get more info. There are guidelines that specify what is a "reasonable" payment. It is based on a percentage of net income and I'm sure it's much less than 33% of net income. That's much higher than would even be allowed with a wage garnishment. Greg
If it were me, I would research how to have the re-hab done through the guarantor rather than a collection agency. Sometimes (I don't know if this is always true), but sometimes the guaranty agency (blah blah Student Aid Commission) has a one-year collection contract with the collection agency. If, after one year, the collection agency has had no success collecting (you've sent NO money to the ca), the guarantor isn't obligated to renew their collection contract. In that case, the loan(s) goes back to the guaranty agency, and you could rehab with them directly. The advantages are these: The collection agency would earn no collection fees from you, and you will no longer have a relationship with the collection agency. This is good because, at least with the collection agency rehab agreement that I read, it was not nearly as favorable to the defaulter as the one you can do through the guaranty agency. It had a lot more gobbledigook than the government-type documents. You should not have to pay any upfront money. What the ca is trying to get you to do is to pay their collection costs upfront (before they have earned them), which is illegal. There is a part in the statute that says collection fees are to be in proportion to the amount of collection, or something like that. Also, I've heard of student loan defaulters who owe less when the account goes back to the guaranty agency, because the ca fees drop off (I guess because they didn't earn them). Finally, if you aren't working through the ca, it's one less credit report entry to deal with in the long line of student loan entries that usually end up on our credit reports. I would search Creditnet for all student loan posts within the past month or so. There has been a lot of interest in this subject. Don't make a move until you read read read. Good Luck.
