My wife just got a call from the Dept of Ed. Ombudsman. He told her that after rehabilitating the onas, while they will be as "Pays as agreed", the past payment history will remain ("180+ days late", i.e.). Is this true? If so what the hell good will rehab be?
He's wrong. The HEA clearly states that a rehabilitation will remove all negative info associated with the account - assuming that these are federal guaranteed loans such as Stafford or Perkins. I have no idea how the HEA applies to personal bank student loans. Did you wife sign a "good faith" rehabilitation agreement with the guarantor or collection agency, which would have stated that upon successful rehab, the accounts would be reinstated (out of default) and deleted? If she didn't, she should call them and get a letter stating what rehabilitation will do for her.
marci, She didn't sign one yet because PHEAA (we're in Pennsylvania) will not accept the payment we can afford to send and they demand at least $300.00/month. I contacted the Ombudsman's office to help us explain to PHEAA our inability to pay to their terms.
Well, the Ombusman's erroneous info aside, I would concentrate on getting him or her to convince PHEAA to work with your wife on an amount to pay each month for rehabiliation instead of whether the loans will get deleted. Rehabilitation *does* guarantee deletion - but your wife just needs to get the ball rolling on the rehabilitation. So... your wife needs to make the Ombudsman specialist her friend and get that person on her side, in order to get PHEAA to agree to the rehabilitation at a "hardship" cost. Once she does that, then she needs to get PHEAA send her a letter saying that she is rehabilitating her loans and that they will be reinstated after 12 months of payments. She needs to do whatever she can to get a letter from PHEAA saying that the loans are in rehabilitation. At this point, even if the initial "good faith" rehabilitation letter doesn't mention deletion - as long as it mentions rehabilitation - she is home free b/c the HEA *requires* that these bad entries be deleted after rehabilitation. I don't care what PHEAA tries to do. All she has to do is get officially into a rehabilitation program in writing. But if worse comes to worse and she cannot come up with 12 months of payments that PHEAA requires, she can always bite the bullet wrt her budget, pay PHEAA for 3 months (eat PB&J for 3 months) -and then consolidate the loans with Direct Loans. The trades will stay on her report (unless she can dispute them off at a later time) but at least she will be out of default and she won't have her income taxes subject to garnishment.
marci, Thanks for your useful insight. As of this morning the scenario has changed for us slightly, so let me explain where we've been and where we are planning to go from here. Back in early 2001, PHEAA was totally unable to find my wife's loans. At that time, before we understood how rehabilitation and consolidation differ, we consolidated my loans (because NCO, collecting on behalf of PHEAA said they needed a minimum of $1600 immediately and $600 per month to rehabâ??yeah, right) and my wife's loans individually. In filling out the paperwork for my wife's loans, I entered her total loan amount that was around $20K, but when the consolidation process was complete, only $700.00 or so was consolidated. I contacted the Dept of Ed. and they said, "that's all the loans she had...â? Knowing this wasn't right, I contacted PHEAA and they could account only for the one loan, which they insisted was approximately $700.00 and paid in full by Dept. of Ed. I pursued this for several months and could not get PHEAA to locate the other debts (wish I had a better paper trail now). To cut to the chase, PHEAA sends my wife a nasty gram demanding payment in full for some $20K!!! I was like, "um, hello??? WE TRIED TO EXPLAIN THIS TO YOU MORONS, SO DON"T THREATEN US!!!" So we made the move and requested rehabilitation. The sent us some info and we agreed to do it ASAP (who wouldn't?). So I wrote up an itemized financial statement that showed that if we stuck to our budget we could afford $50/month. Even with our proof, PHEAA said "no way...it's $300 or no deal". We again submitted our financial statement and they counter-offered with $265. Trust me when I tell you I cannot afford it. I am the sole wage-earner in my household and I am currently seeking a second part-time job, but until then... Finally, fed up with PHEAA's lack of compassion I agreed to pay a bit over $100/month until I can afford more. I sent a check with a letter stating my terms: "If you accept this payment, you accept it as being the 1st of 12 alike payments which will constitute my entry into a loan rehab program" (not my exact words, but you get the idea) The check also contained similar notation, but I would hesitate to call it a restrictive endorsement. Anyway, as of today, the check has cleared the bank so they might have gone for my offer. My next move will be to get them to send me a letter/contract stating as such. As a bit of a CYA, the memo line on the check contained the verbiage "1st of 12 payments for rehabilitation", so at least my checks will present a clear record of my intent. Sorry to be so long-fingered (as opposed to long-winded in speech). I will take your advice and let you know how things progress. Thanks, Andrew
Andrew, What you're doing sounds good. I'd still get PHEAA to send a letter acknowledging that your wife is in rehabilitation. But, even so - people have successfully gotten rehabilitation without the "good faith" letter. What they did get, though, at the end of the 12 month period, was a rehabilitation contract from the servicer (i.e. PHEAA) itemizing the various costs in the loan (now capitalized into a new principle) and to whom the loans would be sold. Once they signed the contract, the loans were officially reinstated. But see, the rub is this: only PHEAA can decide to reinstate her loans with another servicer after the 12 month period. Or... they can demand payment in full and you all can continue the fight you all have going now, if PHEAA never acknowledges or accepts the rehabilitation. However - with documentation of your wife's financial hardship (done twice), and your excellent documentation of the cover letter/check memos stating that she intends rehabilitation, I think your wife has a great case that she intended to rehabilitate with her best efforts. If she gets a good Ombusdman specialist, that person ought to be able to show PHEAA that she deserves to have the loans reinstated, and maybe the HEA will force PHEAA's hand in that regard. Otherwise, it is time for "Mozilla", the godzilla of guarantors everywhere. I wish you both well in this endeavor and I think your wife will be fine.
