Rehab a loan in Garnishment

[jeslyn]

I have a loan in wage garnishment. The original amount of the loan was around $2800. 10% payroll deduction equals about $260 a month toward the loan. Rehabbing the loan requires me to pay a minimum of $50/month on top of the garnishment.

 

So far, I have paid about $500 toward the balance of the loan (boss gives me garnishment receipts )

 

$260 x 12 months = $3,120

$50 x 12 months = $ 600

Grand total pmts = $3,720

 

Now, if it is said that you are successful with the rehab you are credited the collection costs (not sure how much that is since I never received notice of the loan total before garnishment)- I will have virtually no balance at the end of one year. So how is this rehabbed? They can't sell it- it is paid (don't get me wrong, this is good).

 

I guess what I'm asking is: even at the end of the rehab, if there is no balance, do they still remove the negatives? Even though they can't sell the loan to someone else for the official rehab? Is this a weird question? Would I get a refund if I overpay? Would they even tell me? How would I know?

 

I asked my boss if he had the total and all he has is a coupon book with 36 payment coupons- that would be $9,360! WHAT???

 

Help!! Please!!! Never seen this situation

[back2life]

Well If you rehab the loan they will remove all records of the claim being filed and the actual default all deliq will remain. The only way they would remove all deliq is if they made a mistake in servicing of the loan and had to repurchase it. What company is it?

[ziggypop]

I *think* that you need to have a minimum amount left over after the 12 months in order to qualify, but I've seen varying amounts on this (I did a search and AES said the minimum was $500, but I've seen others that don't mention a minimum at all and I think I'd heard here either $1,000 or $1,500). If that's the case, then you may have an issue, depending on how much you actually owe. Generally, after rehab, they forgive most/all of the penalties and fees (but not interest) that have accrued, which would decrease the amount due even more. You can ask whoever is holding your loans (basically, whoever you are working on the rehab arrangements with) for an accounting of your loan. They should provide that to you. If you have any problems getting it, contact the DOE ombudsman's office. You can get general loan information from NSLDS, but I'm thinking that you're looking for interest rates, fees, penalties, etc. and not just what the original amounts were. If you don't know who is currently holding your loans, the NSLDS web site can tell you that too (there's link to it in one of the stickies at the top of the forum -- you'll need a PIN, but you can get that via e-mail). Unfortunately, that buy-back at the end of the 12 months of payments is an integral part of the rehab process, so if there's nothing to buy back at the end, there's nothing to rehab, meaning no negative removal (as I say that, though, I realize that's a bit of a guess, though, so you may want to confirm that).

 

How long since you took out the loan? If you're at the point of wage garnishment, I would imagine you've had these loans for least a little (total guess, though!), so the interest could likely have accrued to a higher amount, thereby making you potentially eligible. There is no forgiveness of the fees and penalties with garnishment, though, so between the original loan amount, accrued interest, a potential 18% CA fee, that could certainly add up to $9k (kind of scary how that happens, isn't it -- I know I was shocked to no end by that!!). If you're being offered rehab, try to get some sort of written rehab agreement. That might help if you end up having an issue at the end of the 12 months.

 

If you are able to rehab, you could actually end up getting all of the negatives removed. DOE (i.e., Direct Loans) is actually the best -- they remove ALL negative information. They have written "Dear Colleague" letters to the other lenders encouraging them to do the same, but they are only required by law to remove the default notation. Therefore, some lenders do remove all of the negative information. Looking just at the experiences of the posters here, it seems like most do remove all of the negatives, but, certainly, they're not required to, so YMMV.

 

Good luck!!! I hope this helps!!

[jeslyn]

I've already called requesting a written rehab agreement, but they (TX Guaranteed) said they do not have anything in writing- they just said start sending in payments. Well, that to me does not sound very wise. If it's already in garnishment- why should I send in extra if they're not going to help me in the end? I really cannot afford to send in extra- I can't afford the 10% they are currently taking from my paycheck. This put me over the edge so I filed BK in March- I was no longer able to squeeze by with my CC pmts with the garnishment in effect. I just want to do what is best for ME. I don't care about them! They are getting their money by force, so the only way I'm going to sacrifice other expenses (which is what I would have to do in order to send in extra) is if I am GUARANTEED IN WRITING that they will remove the default off my credit reports. Otherwise, it just doesn't matter. Should I just contact the ombudsman directly? The collections dept and garnishment departments are not of much help. I just don't see how my situation is so unique that no one else has ever had this happen. That is just not possible.

[ziggypop]

You may want to contact the ombudsman's office. From everything I've heard from other posters here, they're pretty helpful. If nothing else, they should be able to narrow down if rehab would even be a possibility for you. The link to the ombudsman's office is http://www.ombudsman.ed.gov/. There's information on the office and forms to have ready when you call.

 

Good luck!!

[jeslyn]

thanks, I'll keep everyone posted.

 

I feel like the student loan forum is helpful, but needs more information- so I promise to post what I learn from my experiences!

[jeslyn]

Unfortunately, that buy-back at the end of the 12 months of payments is an integral part of the rehab process, so if there's nothing to buy back at the end, there's nothing to rehab, meaning no negative removal (as I say that, though, I realize that's a bit of a guess, though, so you may want to confirm that).

 

I asked this question to TG via email and finally got a response: yes it needs to be $1,000 after rehab.

 

This is what they said about rehab:

 

Thank you for your email.  The left over balance must be $1,000.00.  Here is some information on Rehabilitation:

Eligibility Requirements

-Make 12 consecutive, on-time, voluntary, full monthly payments during the 12 months immediately preceding the rehabilitation of the defaulted loan.

-Payments must be approved by TG.

-You cannot pay ahead or remit double payments.

-The account balance at the time of the rehabilitation must be at least $1,000.

Rehabilitation Process

-Once your account is eligible for rehabilitation, you will be mailed a Default Rehabilitation Agreement.

-Once you return the agreement indicating that you wish to participate, TG will begin to prepare your account for rehabilitation.

-An outside lender purchases the original loans and you continue to make one monthly payment, retaining the original terms and interest rate.

If you have any questions, please contact our office at 1-800-222-6297.  Our offices are open from 8 am to 9 pm Monday through Thursday, CST, 8 am to 5 pm Friday. 

.

 

Still waiting on more emails from them answering various questions and I plan on calling them tomorrow.

 

I will post my news in this thread.

 

If it weren't for this forum, I would have never known about my options- I am so grateful and will post all that I learn in hopes that no one ever ends up in this same situation!

[jeslyn]

I talked to TG on the phone today- very nice over the phone. I didn't get very far with email inquiries so I had to call.

 

Please note: You cannot REHAB a LOAN while in BANKRUPTCY. You can make payments (which will be applied directly to your principal- a good thing), but these will most likely not count toward your 12 rehab payments. You have to wait until your BK is discharged in order to rehab- their collections dept. wouldn't even talk to me.

 

This is where my unique situation came into play. My current loan balance with them is only $2,500. I was being garnished 10%- approximately 220 per month. Garnishments are about to stop (they said a letter is on it's way to my boss & no, it doesn't say that I'm in BK ).

 

Initially, the rep on the phone said that it would benefit me to continue to pay as much as I could afford during the bankruptcy because it is applied directly to the principal balance and not the interest. Normally, this would make perfect sense and would be a very good thing. However, given that my current balance is so low, this would not help MY situation because that would not leave me with enough to rehabilitate and get the default off of my credit reports. She agreed!!

 

So then we started punching numbers and she told me that my loan is accruing interest at $.28 per day or $8.40 per month. She said that *technically* I don't have to pay anything right now because of the bankruptcy, BUT, if collections saw that I was making payments during the BK, they would be more willing to work a deal with me once my case was discharged and the loan was back in their department...

 

I think I am going to pay 50 per month for the rest of my bankruptcy and then work with collections to do the same after discharge for the rehabilitation. This will give me a high enough balance ($1,000 minimum) for them to reissue the loan and then I will pay it off quickly.

 

The way I see it- everyone wins!

 

Any comments or suggestions? Quilty? Ziggy? Cheech?

 

Thanks for giving me the guts to call and ask! Couldn't have done it without all that I've learned from CB Student Loan Forum!