Student Loan Default Rehab Nightmare

[DBC]

Here is some background related for an ongoing issue I've had with the USDOE. I'll put it in more-or-less chronological order:

 

1. I had many student loans held by many OCs, so I chose to consolidate all through Direct Loans (i.e. federal gov't as the OC).

 

2. During the process, I could not consolidate a handful of the loans as they were in default. However I participated in the process of "rehabilitation" so I could eventually have them consolidated. I made periodic payments (i.e. when I had the money) to this end.

 

3. I filed my 2009 taxes and received a letter from U.S. Department of Treasury informing me my income tax return would be offset and sent to the aforementioned defaulted student loan accounts. I was more than happy for this to happen as the offset would satisfy about 98 percent of the outstanding balance.

 

4. Income tax offset occurs around July 2010 and Dept. of Ed receives their money (as evidenced by account statements of payments received showing a very minimal balance).

 

5. One month later, I receive two letters from Dept. of Ed stating: 1) the IRS reversed the income tax offset for unknown reasons--perhaps an injured spouse claim (which is unlikely as I am single); 2) and since the IRS took the money back I now owe them $$ and hurry up or else.

 

6. I immediately got on the phone and inquired about the issue:

 

a. I called Dept. of Ed and asked for information about why the IRS reversed the offset. Answer: I dunno call the IRS.

 

b. I called the IRS: I don't know--call U.S. Dept. of Treasury.

 

c. I called Treasury: Why are you calling us? Go bug the IRS; they gave and took back the money from Dept of Ed.

 

In sum: lots of wasted time with no answers, dealing with rude and presumptuous CSRs, and a LOT of buck passing.

 

7. I received notice from the IRS: Give us your account number, address, etc. so we can send you your income tax return.

 

I sent them my bank account information/numbers to that end. I received the income tax return and earmarked it to satisfy my defaulted student loan debt.

 

8. Continued circular madness of trying to find out why the IRS reversed the income tax offset to use as a explanation to Dept. of Ed so I could continue to "rehabilitate" my defaulted accounts.

 

9. Dept. of Ed assigns defaulted student loans to CA who sends me dunning letter that includes principal debt, prior accrued interest, and particularly nasty additional penalties/fees.

 

10. Contacted Dept of Ed. and asked if they could help and they told me tough luck; go talk to the CA, it's not our problem anymore.

 

11. I settled with the CA for an amount that reflected the principal and accrued interest prior to the OC assigning the debt in (futile/naive?) hope the Dept. of Ed would eventually "fix" the problem and I could be in good graces with them again.

 

12. Repeated actions detailed in #8.

 

13. Received a letter from the Dept. of Ed that my debt was settled in full.

 

14. All debts were paid in full in November 2010 and my CRs show the accounts (with the OC--no mention of the CA) as paid in full but with payment histories showing they are in collection status well beyond the date the debt was satisfied.

 

15. As I got nowhere with #6, #8, and #12, I called the Dept. of Ed omsbud and explained my situation to the intake clerk who offered little assistance, so I asked for a supervisor. The supervisor forwarded my request for an investigation on the matter. Hopefully, they will respond soon...

 

So, in the meantime, what sort of recourse do I have?

 

I realized I probably royally messed up by settling with the CA but I did it in good faith to stay on good terms with the Dept. of Ed.

 

Any ideas, suggestions, input would be greatly appreciated.

[LynnInMN]

Recourse for what? An error was made...it happens. Your loan is paid. Let it rest.

[DBC]

Recourse for what? An error was made...it happens. Your loan is paid. Let it rest.

 

Yes my loans were paid, but the "error" is wreaking havoc on my credit reports and I'm not just going to "let it rest".

 

My original goal was to rehabilitate the defaulted loans and not to engage in an emergency settlement with a bloodsucking third-party CA who shouldn't have gotten a hold of the account in the first place.

 

Please refer to the following points from my previous post:

 

2. During the process, I could not consolidate a handful of the loans as they were in default. However I participated in the process of "rehabilitation" so I could eventually have them consolidated. I made periodic payments (i.e. when I had the money) to this end.

 

3. I filed my 2009 taxes and received a letter from U.S. Department of Treasury informing me my income tax return would be offset and sent to the aforementioned defaulted student loan accounts. I was more than happy for this to happen as the offset would satisfy about 98 percent of the outstanding balance.

 

4. Income tax offset occurs around July 2010 and Dept. of Ed receives their money (as evidenced by account statements of payments received showing a very minimal balance).

 

5. One month later, I receive two letters from Dept. of Ed stating: 1) the IRS reversed the income tax offset for unknown reasons--perhaps an injured spouse claim (which is unlikely as I am single); 2) and since the IRS took the money back I now owe them $ and hurry up or else.

9. Dept. of Ed assigns defaulted student loans to CA who sends me dunning letter that includes principal debt, prior accrued interest, and particularly nasty additional penalties/fees.

 

10. Contacted Dept of Ed. and asked if they could help and they told me tough luck; go talk to the CA, it's not our problem anymore.

 

11. I settled with the CA for an amount that reflected the principal and accrued interest prior to the OC assigning the debt in (futile/naive?) hope the Dept. of Ed would eventually "fix" the problem and I could be in good graces with them again.

 

So, instead of having three defaulted student loans that would have been "rehabilitated" and eventually aggregated with the rest of my Direct Loans, Dept. of Education's "error" have produced three very screwed up TLs on all three of my CRs showing a bizarre array of paid/unpaid collections--some well past the date of payment-in-full. And, this is after I disputed them with the CRAs. These accounts should not have been assigned to the CA in the first place, and despite my long-standing efforts, I have yet been given a straight answer why this happened, hence the omsbud--no reply yet (and its been over ten days).

 

I have solid documentation relating to this issue with no clear indication why DOE decided to fob my accounts away to the CA. Would a 623 letter be appropriate?

 

I'm not going to roll over on this one...

 

Ideas? Thanks!

[LynnInMN]

However I participated in the process of "rehabilitation" so I could eventually have them consolidated. I made periodic payments

(i.e. when I had the money) to this end.

 

To me this indicates you did not qualify for rehab. To have a loan rehabbed, you must make 9 consequitive monthly payments...not periodic paymnets. You paid off the accounts prior to rehab, so the report will continue.

During the process, I could not consolidate a handful of the loans as they were in default.

Defaults are eligible for consolidation...always have been.

 

I still dont see what your problem is. The IRS/DOE sending money back and forth is really moot at this point. This incident did not affect the status of your loan. You made the choice to pay it off instead of making payments. As for the reporting, even after you paid it off, it is still a collection account...your status doesnt change.

 

Since the your account is paid in full neither the DOE or the Ombudsman is going to do much, if anything.

[DBC]

However I participated in the process of "rehabilitation" so I could eventually have them consolidated. I made periodic payments

(i.e. when I had the money) to this end.

 

To me this indicates you did not qualify for rehab. To have a loan rehabbed, you must make 9 consequitive monthly payments...not periodic paymnets. You paid off the accounts prior to rehab, so the report will continue.

 

Fair enough, but aren't student loan lenders subject to the FCRA like every other sleazebag OC/CA/JDB?

 

During the process, I could not consolidate a handful of the loans as they were in default.

Defaults are eligible for consolidation...always have been.

 

Shame on me for being gullible. When I had the accounts consolidated, All but the three in question were picked up by DL. I inquired about this and was told by (at least) one CSR with DL that they could/would not incorporate the accounts as they were the only ones in default. I was given the option to commence rehabilitation and chose to do so.

 

If the accounts should have been consolidated, but DOE messed up by not scooping up the three loans in question, can you honestly tell me I have no recourse? Or do you revel in telling me I'm screwed and I should just give up.

 

I still dont see what your problem is. The IRS/DOE sending money back and forth is really moot at this point. This incident did not affect the status of your loan. You made the choice to pay it off instead of making payments. As for the reporting, even after you paid it off, it is still a collection account...your status doesnt change.

 

Since the your account is paid in full neither the DOE or the Ombudsman is going to do much, if anything.

 

So what if they are paid? The account should not have gone to collection. There is "due process", and I have a feeling DOE can not accelerate a loan and then summarily assign a loan to a third-party CA without providing me an opportunity to inquire and dispute to what happened "behind-the-scenes"--and believe me, I went to great lengths to do so. Furthermore, even if the status of the TL is legitimately in a collection status at some point in time (which it wasn't), that doesn't abrogate DOE's legal obligation under the FCRA to not report inaccurate B.S. on my CRs like having paid accounts showing in collection status in the account history months long after the debt was paid-in-full (i.e. the debt was paid in full November 2011 but the monthly history shows it's still being collected on to present). Please excuse my ignorance in advance, but is that not a FCRA violation--especially after a CRA dispute?

 

It appears to me (and as I've said before, I have documentation to support my assumptions) that DOE had dropped the ball on several occasions. And something tells me in my gut that there is some way to get this rectified and I'm determined to find out how to do it. The problem is that I don't know how to do it--yet--but I am more than determined to try.

 

Again, I'm not going to just bend over and grab my ankles for perceived authority figures and say "go ahead and hit me again please" while they flagrantly disregard the law, their own policies/procedures, etc.

 

Lynn, I want to sincerely thank you for you exemplifying the "just deal with it attitude" (inherent in bureaucracies) that is unnecessarily foisted upon people inquiring about ways to assert their rights. You have given me a boost in morale and gumption to not accept an abritrarily prescribed fate by those who put hardship on others but do not hold themselves accountable to their own mistakes.

 

I will fight this to this issue until it is resolved to my satisfaction.

 

Have a pleasant evening!

.

[rslifkin]

I have read through your post. I would be irate too. Sometimes, it really does seem as if they enjoy it.

 

I would send detailed post you made to Ombudsman.

 

Sorry ymto hear of your nightmare scenario.

[LynnInMN]

So what if they are paid? The account should not have gone to collection. There is "due process", and I have a feeling DOE can not accelerate a loan and then summarily assign a loan to a third-party CA without providing me an opportunity to inquire and dispute to what happened "behind-the-scenes"--and believe me, I went to great lengths to do so.

 

Accounts can be sent to collections immediately following a default...I used to get accounts 10 days post default. So they CAN assign them to a CA immediately. But what I am reading from your post is you were not a new default....the DOE doesnt file tax offsets on current accounts. That is the point I am trying to make....your default pre-dated any of this tax offset mess. What happened behind the scenes was already happening and IMHO is irrelevant.

 

Furthermore, even if the status of the TL is legitimately in a collection status at some point in time (which it wasn't), that doesn't abrogate DOE's legal obligation under the FCRA to not report inaccurate B.S. on my CRs like having paid accounts showing in collection status in the account history months long after the debt was paid-in-full (i.e. the debt was paid in full November 2011 but the monthly history shows it's still being collected on to present). Please excuse my ignorance in advance, but is that not a FCRA violation--especially after a CRA dispute?

?

I know the DOE has had some reporting issues, but are you reading your report correctly? Are you reading it as a current status or as the final status? Is the account zero'd out? Other than zeroing out the balance, the tradeline remains the same.