Hello Everyone, Have a problem. My niece went to go and get her income tax check and the government garnished the entire check. She had a student loan through the government that was carrying a balance. With that said ... In the meantime she thought she was paying on this loan but low and behold it turned out to be a collection agency. She did not realize that this was a collection agency . She is not familiar with her rights when it comes to credit. The collection agency paperwork reads as if they are a education loan company. ex... MSI Education Services. Anyway she has been paying them $70.00 a month since November. When she did not get her income tax check she called them and they said that they had a right to take the check blah, blah, blah. I looked at her letter that she received from the Dept of Treasury and it directly says that it was paid to the Dept of Ed. Not the collection agency. They are blatantly lying to her making her believe that they are the ones that had her tax check garnished. What would you folks suggest? Have her stop making the payments to the CA and send them validation? Because she has been paying them would'nt the constitute admission of the debt ??? Help !!!! need advice, suggestions!!!
In order to have her Federal Tax Return taken, she should have been given a notice that her Tax Return was going to be offset by the IRS unless she paid the loan or became current. They usually send out a letter letting you know a few months in advance (about 3-5 months, I think) and give you time to appeal if you think that there is a problem If this is a federally subsidized SL that is. ( I am not sure about private SL.) They do not have to have a judgement to garnish wages or to have your tax return seized. If the tax return was larger than the loan debt, she will get the difference in a refund check from the loan holder. She has a few options. 1) Pay the loan 2) Go through loan rehabilitation (12 months of on time payments and the loan will be removed from default status and CR updated to show the loan is no longer in default 3) Consolidate the loan through a program such as the William Ford Direct Consolidation loan. One of the benefits of the WF loan is they have an income contingent plan. The ICP takes into consideration family size and income. Since she has already lost her Tax return, I would recommend going the laon rehab route as it will take her loans out of the collection agencies hands and be much more beneficial to her credit in the long run as her default status will be changed and she will be out of default. You can find a lot of information on the Dept of Educations website. Here is a link to William Ford http://www.ed.gov/offices/OSFAP/DirectLoan/index.html Here is a link with some info on what Loan Rehab is. http://www.ecmc.org/student/st_drehab.html Have her call William Ford tomorrow, they are very pleasant and will tell her about all of her options to get out of default. If you have anymore questions feel free to email me. I have been through all of this personally, unfortunately ~ Good luck! 3day
For your neice's situation I don't think the validation method is the way to go Once a borrower is in default the Dept of Ed. can take your return or garnish your wages fairly easily. There is an appeal process and you may want to look into it, but she has probably lost her right to appeal as it has to be doen before they seize the return . That does not mean that you can't dispute the negative tradeline with the CA or CRAs and have them removed from a CR, that is entirely different. And I am not saying that you can't ask for validation of the debt, but don't think that you are going to get your SL debt wiped away clean because you don't get validation from a holder of the SL. The methods that are talked about on this board, they are really not geared to SL debt. I am sure the FDCPA applies to all the collectors of SL debt, I am not saying that it doesn't and I don't want anyone to think I am saying that it doesn't, but for your paticular situation- I don't think validation is the way to go, I think quickly getting out of default through consolidation is probably the best route overall for a better CR future and your neice may even get a more favorable interest rate through consolidation. I did, I went from 8% to less than 5% and my payment was hundreds of $ lower. SL are a tricky monster and have a life unto themselves. It is almost entirely impossible to have them forgiven in BK unlike most debt. I think the best advice would be to get her out of default quickly. Do you know why she was paying a collection agency for her loans? Had she ever paid the holder of the loan directly and then stopped paying? Perhaps a little more info on how she ended up with the loans in collection and we may be able to help you better. The collection agency may be an arm of your states Student Loan Guarantor and not a typical CA. Once federally subsidized SL are in default, they are sent back to the Dept Of Education as they are the ones who guarantee the loan (say they will pay the loan back to the bank that intially loaned you the money if you default). That is why there is no credit check when you take fed SL out at school, there is very little risk with a Federaly Guaranteed Student Loan for the issuing bank, the US gov takes the risk. That is why the Tax Return went to the Dept of Edu. Did she use up her deferment/forbearance options? There are quite a few options for forbearance which she may use once the loan is out of default. (When you don't have to make a payment on the loan for a period of time, however interest accrues during that time.) 3d
she had two student loans. I believe both were originally taken out with fanny mae, one went into deferment which it still is in deferment due to her situation, but the other one for some reason or another was in deferment, but then it had gotten out of deferment and I believe she never re-applied to put it back into deferment. So, it went delinquent. She understands about the government taken her Tax's check. Actually it was better for her because it paid her loan off for the Dept of Ed. But, This CA is the real problem, even when she called them to ask about the garnishment they acted like they were the one's who had it garnished and turned around and continued to tell her to pay her $70.00 a month payment. This is wrong! They are trying to get her to continue paying on a loan that was just paid by the taken of income tax check. My first question is, if government loans go into default and they are eventually returned to the Dept of Ed, how did this collection agency get a hold of this debt ? Weather they were contracted out by Fanny Mae or Dept of Ed , They are still trying to collection something that has just been paid by garnishment. They are definitely a CA, they even have there mini Miranda on the paperwork. I'm trying to figure out weather this would fall under the FDCPA 807 or 812 furnishing false or misleading info or furnishing certain deceptive forms. The person she spoke to when she set payments up unknowingly with the CA told her that she was re-habbing her loan and in 12 months with good pay they would wipe it clean, Which leads me to my next question. How can a CA re-hab a student loan only the government can do this. Correct me if I'm wrong.
The loan is probaby serviced through Salllie Mae, Fannie Mae is a different entity, Have her do a debt validation wuth the CA., CRRRR. ASk them to provide a complete ledger of all payments made to the account since the origination of the loan and to incllude any time where the account was in forebearance. Tell them you are disputing the balance of the loan. Make them prove every penny ever paid and every bit of time that the loan was in forbearance/deferment. Here is a link where you can get up to date data on the status of the loans that are funded by the government. http://www.nslds.ed.gov/ She may have to apply for a pin number from to obtain access, but it does let you know if she is in default or good standing on her loans. They have to cease collection activity until they validate the debt. In the mean time, call the Dept of Education and ask for the balances of her loans. Ask for the most recent payments made and see if the seized return has been applied to the loan and if it has satisfied the loan completely, ask if there is a refund of any blanace due her. HAve them send you a letter in the mail and by fax to you and the CA that the loan is satisfied (if it has been by the TR) If it hasn't been satisfied, have her apply for a loan rehab or consolidation loan right away and get that loan out of the hands of the collection agency, they are probably costing her money in fees and making money on her student loan in commsisions. The CA shouldn't be making money on your her education, she should! Start on this tomorrow AM by calling the Dept of Edu and getting her actual balances. If the loan holder screwed up by not processing a forbearance correcty, she may be entitled to some fees back that the CA has charge her. 3day
Sorry, I didn't notice the CA offering to rehab the loan. Did she fill out a loan Rehab application? If she rehabilitated the loan she shouldn't have had her return seized as long as she was making timely payments (Withhin 15 days of the due date). I would call the Student Loan omsbudsman (a middleman who is supposed to be an objective party to an issue with SL) and see what is going on with the rehab issue. Have him/her look into the account. Something definately doesn't seem right. But do get your oan baances from the DOE as well. The CA can offer the rehab program. They also offer programs on consolidation too. I believe they are required to include information on rehab/consolidation, etc as part of the collection agreement.. I could be wrong. Mine always sent info and consolidation loan forms with the collection notices. What is the name of the CA and where are they located. What state are you in? 3day
3day, Let me have her answer some of the questions for me and make some phone calls. I will let you know in about a day what comes of it. Thanks for all your help kathy
