Old Defaulted Student Loans

[tj100]

I defaulted on several student loans in the late 80's. I believe they were held by Sallie Mae (SM) at that time. Later, in the mid 90's, SM sold the defaulted loans to Company A, who sold them to Company B, who sold them to Company C..., etc. Eventually, they were sold to Arrow Financial, who now holds the loans. Arrow Financial, according to their website (www.arrow-financial.com), specializes in purchasing debts of all kinds, including student loans. Thus, I believe they own the loans outright and are not a CA acting on behalf of anyone else. So, my first question is, after SM dumped the loans to a private company, who sold them to another private company..., etc., is there a SOL on collecting, just like any other loan sold to a private company?

 

I guess that Arrow bought the loans at a small fraction of the amount owed because they wrote and offered me a settlement for a fraction of the amount owed on one of the loans. My second question is, then, if I do take the settlement, will any negative info appear on my CR? The settlement letter does say that they will notify the credit bureaus of the settlement if they are reporting this account, but they don't say what they will do if they are not reporting this account. None of the loans currently appear on my CR currently due to their age.

 

I can only assume at this point that they own all my other loans, too. If that's true (probably is), I'm wondering if they are offering a small settlement on that one loan to find me and flush me out, so to speak, so they can demand full payment on the other loans?

 

The loans were guaranteed loans, but I'm not sure who guaranteed them. I have always thought they were federally insured student loans, but the notice that SM mailed me when they sold my loans to Company A has at the top of each individual loan page, a notation that says that the guarantor is a state, not the federal government. Maybe that's just a fine point, and they are just listing the state that the bank was in, and isn't very important. Or maybe they were state guaranteed loans. I don't know, but I never heard of state guaranteed student loans. I do know that they aren't listed on the government web site that supposedly shows all the student loans that I have, their status, and who is servicing them. That's when I started thinking that either they weren't federally insured (though Sallie Mae did have them for a very long time) or the federal government has totally washed their hands of them after so long and sold them off to a private company to at least get something for them, in which case I would no longer owe anything to the federal government (I know, it's a long shot).

 

I was thinking that I should ask Arrow for verification of the loans, including a copy of the original loan with my signature and an accounting history. Since the loan has been sold several times they might not have this info. If they can't provide this, am I off the hook? Is this a good idea?

 

If anybody has any help concerning my problem or any experience they can share about Arrow Financial, I would greatly appreciate it. Thanks very much.

[TxQuiltGirl]

Hi, welcome to the Student Loan forum!

 

The first thing you need to do is determine if these were private loans or guaranteed loans. Your post is not clear on that, and you say you checked the "website" that "lists all the loans." Did you check here http://www.nslds.ed.gov/ ?

 

You need to realize that if the government guaranteed these loans, they will not EVER forget you owe them. They will garnish your wages, levy any tax returns and make it impossible for you to get loans from the FHA and VA, among others. You say that the loans were guaranteed by a state - that is very common, and if you do a search here you will find many state guarantors represented - Texas and New York spring to mind.

 

If these are indeed guaranteed loans, there is no SOL on when they may be collected, so sending a DV letter would do you no good whatsoever. Arrow may specialize in purchasing debts, but that doesn't mean it is their only avenue of business. The government never sells debts off to a JDB, but they do have several CAs who collect for them.

 

It appears that Arrow is owned by Sallie Mae (http://www.arrow-financial.com/) and therefore they may only be collecting for SM, and have not purchased the debt.

 

You can contact SM and find out who holds your loans, but you need to be ready to make payment arrangements. Read up here on wage garnishment, tax levies and rehab before you contact them.

 

Dealing with guaranteed student loans is the one time I would advocate using the phone when dealing with debt. But don't pick up the phone until you are very well versed in the tactics Arrow will use on you to get you to pay up.

 

Please let us know if you have any more questions; we'll be happy to help. Good luck!

[LynnInMN]

Student loans are never sold...claims are filed or balances transfered. The government insures them so there is no need to sell to junk debt buyers. Arrow is a Sallie Mae company and they will be working the loan on behalf of whatever loan guarantey agency still owns it.

 

State Guarantey agencies?? There are a ton of them. These are what are called FFELP lenders...Federal Family Education Loan Program. CA, IL, CO, NY, CT, KY and PA are only a few. The entire list is below. Most FFELP lenders service a state or region, so if you lived and went to school in Illinois your lender is probably ISAC.

http://www.finaid.org/loans/guaranteeagencies.phtml

 

It will be very easy for Arrow to validate the debt. The federal paperwork requirements for student loans are very strict. The state guarantey agency that insured you has had a copy of your loan docs since you took it out. They also have maintained your payment history since your default. When loans are transfered to a CA, it all goes by electronic transfer. The loan holder maintains all records. Any information you request from Arrow will come direct from the Guarantey.

 

Another word of warning. Your loan is at the state level now and the SOL has run out. However, due to the age of your loan, you loan would be subject to subrogation by the US DOE. Even though a state guarnteed your loans, the US DOE is the ultimate owner. Subrogation happens when the state is unsuccessful in collecting. The DOE pays off the state (at a lower penalty rate) and the loan is transferred. The DOE will report again for another 7 years. The 18.5% collection fees are adjusted to 42.84%. So if they are offereing you a settlement now and you can afford it, take it. Or rehab the loans. Or consolidate them. Leaving them without doing anything will cost you a whole lot more!

[tj100]

Thanks TxQuiltGirl and LynnInMN for the great info.

 

The loans were guaranteed loans. You are saying that the government never sells student loans and I believe you, but I don't understand. It appears that Sallie Mae (SM) sold my loans. In the mid 90's I got a letter that was titled "Notice of Sale of Account and Servicing Rights" from SM for each of my defaulted loans. The letter was short and said the following:

 

"You are hereby notified that your account, and the right to collect payments form you, has been sold by Sallie Mae to: Recovery Asset Group II, Ltd, etc. Effective as of the date of this letter, send all payments to the purchaser at the address provided above. If you have any questions relating to the transfer of servicing, please call the number listed above for them. The sale of the account does not affect any term or condition of the debt instruments, other than terms directly related to the servicing of your loan."

 

I may be wrong, but I interpret this to mean that SM got rid of my loans and sold them outright. They went to several other agencies before they ended up in the hands of Arrow. I don't think the other agencies were affiliated with SM. Also, according to the Arrow website, they weren't bought by SM until at least a year after I was first contacted by Arrow. So, I think that Arrows' now being owned by SM is just a coincidence.

 

On my letters from Arrow they refer to my loan as SAGRES. Does anyone know what that means? They don't say if they are a CA for anyone. They just offer me a settlement of my SAGRES debt. Can anyone tell me if I do take the settlement, if it will appear on my credit report. They aren't there now because they dropped off due to their age.

 

LynnInMN, do you know how long the state has to collect loans before there is subrogation by the DOE. It has been over 15 years since they went into default. Also, you said the SOL has run out at the state level. Does that mean that the state can't legally collect and that the loans should have already been subrogated by the DOE?

 

Lastly, does anyone know why the loans don't appear on the government web (http://www.nslds.ed.gov/) site that supposedly shows all my student loans?

 

Thanks again very much for the great help. It really is appreciated and it's great to have this forum to learn from.

[LynnInMN]

I wrote a long response last night but the board went down. I have to leave shorty but I wanted to answer.

 

Call Sallie Mae and find out what the scoop is on these loans. Find out from them whether they are federal or private. Some of the information you gave has me wondering.

 

Find out who they were guaranteed by if they were a federal loan.

 

I am wondering if these are loans that were mishandled and somehow lost their insured status. This rarely happens but I remember cases back in the late 80-s early 90s. There was one guarantey agency, HEAF, that went BK and loans were transferred all over the place. I remember some of those loosing their insurance backing. It is a long shot there is definately something strange about these loans.

[tj100]

Thanks again for the replies, and special thanks to LynnInMN. I appreciate the time and effort you've put in and am sorry you spent all that time to reply just to have it lost! I also would have liked to read it. But you gave me good info and started me thinking about what I should find out. I've been doing this for the better part of the last two days, looking through old stuff I have, and wanted to have more info before I replied to you. Here is what I've been able to find out. I can't be absolutely certain that it's all correct but I'm trying to piece together things as accurately as I can:

 

The loans were Federal Stafford subsidized quaranteed loans. The loan applications said "Student Application for Federally Insured Loan." I got all from the same bank that had the words "Federal Savings and Loan Association" as part of its name. That bank has since merged or been bought ouy by another one, that I don't know the name of. After I graduated, I received a payment book and sent payments (I forget to whom) while I could. At some point, Sallie Mae (SM) held my loans but probably was using various CAs to help collect, until the servicing of the loans was transferred to Sallie Mae's Loan Servicing Center. I know this because I received the following letter from a CA:

 

"We are sending you this letter as formal notification that we recently transferred you education loans to Sallie Mae's Servicing Center. As you know, some time ago, Sallie Mae purchased your education loans from your lender. Now they be taking direct responsibility for servicing you loans as well."

 

Even though it had been some time since I made any payments, I don't think the loans were defaulted yet because I have several letters from SM warning me I was about to default. I did default. Around the time of default, the servicing of my loans was transferred to Equifax (Accounts Receivable) and, maybe, subsequently, other CAs, as well, while still held by SM. Then I received the letter I quoted in my previous post about SM selling my loans to Active Recovery. Subsequently, my loans were sold/transferred to various enities, and now the current collection activity is from Arrow Financial, a private company that was bought by SM last year. SM also became a private company last year, prior to its' aquiring a majority share in Arrow, and is no longer a quasi-government orgranization. Though I've tried to be as brief as I can, the entire time frame discussed in this post actually took place over about a 15 year period.

 

I'm, also, puzzled about why the loans are not listed among my loans on the government website (http://www.nslds.ed.gov/).

 

As if that's not enough, Arrow seems to be charging me a interest rate of at least 15%. I looked at the increase in the amount owed from two letters and that appears to be the interest rate. That's more than double the origianal loan rate. Is that legal?

 

I'm very worried about the loans reappearing on my credit report and starting the 7-year period again if I do make a settlement payment. How can I prevent that?

 

I'm wondering if I should ask for verification. When I asked SM to mail me copies of the original loan documents about 10 years ago, they sent me back copies that appear to have been made from microfilm. Maybe the microfilm was lost or misplaced. It would be interesting to get an accounting history, too, to see why the amount owed is increasing so much.

 

At this point, since SM is a private company, and they own the company servicing my loan, I'm a little apprehensive about calling them to see if they have any info on my loans. I'm afraid they'll be more interested in finding out info on me than on helping me out.

 

Anyway, thanks again for the replies I've received up to now, and special thanks to LynnInMN!

[tj100]

Now that I have my info resonably correct, is there anyone, especially LynnInMN, that can reply to any issues in my last post or tell me how to proceed...I would greatly appreciated it. Many thanks in advance for anyone who can help me out!!

[LynnInMN]

I did default. Around the time of default, the servicing of my loans was transferred to Equifax (Accounts Receivable) and, maybe, subsequently, other CAs, as well, while still held by SM. Then I received the letter I quoted in my previous post about SM selling my loans to Active Recovery. Subsequently, my loans were sold/transferred to various enities, and now the current collection activity is from Arrow Financial, a private company that was bought by SM last year. SM also became a private company last year, prior to its' aquiring a majority share in Arrow, and is no longer a quasi-government orgranization. Though I've tried to be as brief as I can, the entire time frame discussed in this post actually took place over about a 15 year period.

 

I'm, also, puzzled about why the loans are not listed among my loans on the government website (http://www.nslds.ed.gov/).

 

As if that's not enough, Arrow seems to be charging me a interest rate of at least 15%. I looked at the increase in the amount owed from two letters and that appears to be the interest rate. That's more than double the origianal loan rate. Is that legal?

 

I'm very worried about the loans reappearing on my credit report and starting the 7-year period again if I do make a settlement payment. How can I prevent that?

 

I'm wondering if I should ask for verification. When I asked SM to mail me copies of the original loan documents about 10 years ago, they sent me back copies that appear to have been made from microfilm. Maybe the microfilm was lost or misplaced. It would be interesting to get an accounting history, too, to see why the amount owed is increasing so much.

 

At this point, since SM is a private company, and they own the company servicing my loan, I'm a little apprehensive about calling them to see if they have any info on my loans.  I'm afraid they'll be more interested in finding out info on me than on helping me out.

 

Anyway, thanks again for the replies I've received up to now, and special thanks to LynnInMN!

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If this is fact a defaulted federal or FFELP loan, ownership of the loan should now be in the hands of the guarantey agency. SM does not hire collection agencies to collect defaults on federally insured loans. The guarantey agencies do. Sallie Mae is a lender/servicer/collector of student loans. Sallie Mae cannot do anything to you without the authorization of the guarantey agency. They technically do not own them unless they are private loans.

 

What state were you living in when you went to school? Was that the same state you lived in??? That would be the first clue to your guarantey agency. Is there anything on the prom note that indicates the guaraney agency?? Ususally it is listed on the note.

[tj100]

LynnInMN, Thanks again for your reply! The Note says above "Promissory Note": "Department of Health, Education, and Welfare; Office of Education; Washington, DC." Other than that, I can't see a reference to a guarantey agency. Origianlly, I went to school in my home state (the same state as the bank), but then I took out some more loans from the same bank when I went to school out of state, through the same program. Are you saying that you think the guarantee agency for my home state was the one that guaranteed my loans? I know I asked about this before, but I'm a little confused. Is the guarantee agency the state itself, or is it the Federal Gov itself (like DOE) acting through a branch office that covers the area that includes your home state? Thanks again!

[LynnInMN]

What State did you live in/go to school in??

 

Not every state has/had a state agency. Some guarantors are regional. I am in Minnesoa. We dont have a state agency. The majority of ffelp loans from this state go thru Great Lakes Higher Ed.

 

 

Some state guarantors are state funded, like Edfund for the California Student Aid Commision (CSAC). Others are private like NELA, Northwest Education Loan Association. These are FFELP lenders. However all of these loans are ultimately owned by the USDOE. Confusing..yup.

Edited July 11, 2005 by LynnInMN

[tj100]

I lived in and went to school in Florida.

[LynnInMN]

This is probably who your state guarantey agency is...

 

Florida Office of Student Financial Assistance (OSFA), part of the Florida Department of Education, is a student loan guarantee agency located in Florida. For customer service, call 1-800-366-3475 or 1-850-410-5200 or send email to osfa@fldoe.org. For more information, call 1-888-827-2004 or write to Florida Department of Education, Office of Student Financial Assistance, 1940 North Monroe Street, Suite 70, Tallahassee, FL 32303-4759.

 

 

I would recommend asking Sallie Mae who the guarantee is.

[tj100]

Thanks for the reply. Do you know if OSFA is state funded? Since I defaulted, would OSFA have paid the loan to the bank and then, itself, gotten reimbursed by DOE? You say that all the loans are ultimately owned by the DOE. Why do you think the loans don't appear on their website with the few other loans I have?

[LynnInMN]

Thanks for the reply. Do you know if OSFA is state funded?

Who funds the guarantey agency really doesnt matter.  It is totally irrelevant.  Same goes for Sallie Mae...who owns it, whether it is a private or publicly owned company, is irrelevant to your loan obligation.

 

Since I defaulted, would OSFA have paid the loan to the bank and then, itself, gotten reimbursed by DOE?

 

Yes and no.  Your guarantey agency paid sallie mae for your default.  They maintain the loan in their portfolio. The DOE doesnt not get involved (usually) for several years.  However the DOE has their own interenal collections and agencies and the company that is collecting against you right now is not a DOE vendor. 

 

CALL SALLIE MAE or WHATEVER CA IS TRYING TO COLLECT FROM YOU RIGHT NOW...THEY ARE THE ONES WHO CAN GIVE YOU THE ANSWERS!!!!!!!!!!!!

 

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[TxQuiltGirl]

TJ, Lynn is right - we can't give you the answers that you're looking for. You're going to have to call the CA who is collecting on your loans to get the information. There are too many variables in this equation for someone to give a proper answer that isn't intimately familiar with what's going on.

 

Good luck!

[tj100]

Thanks again for your reply. I don't mean to bug you. I haven't made contact with anyone about these loans for over a decade and I'm biting my nails about how to handle it. I don't want them reappearing on my CR and I don't want to mess things anymore, while at the same time finding the best way to pay them off. It's been ten years since default. Do you know why they don't appear on the gov website with the rest of my loans? My last question about these defaulted Stafford loans concerns the the interest rate being charged. It appears that Arrow is charging about 15%, if you just look at the total balance, which is all I have to go by. Is the interest rate supposed stay the same after default?

[LynnInMN]

My last question about these defaulted Stafford loans concerns the the interest rate being charged. It appears that Arrow is charging about 15%, if you just look at the total balance, which is all I have to go by.

You cant go by the total balance.  You are subject to up to 25% in collection fees (one time charge.)plus the loan rate which should be quoted in your prom note.  Also your loan rate could be fix or variable. 

 

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