I am in the process of filing bankruptcy and rehabing my student loans. Received a notice in the mail today from West Asset Management collecting for the department of education. Principal is 17K, interest is $1800 and they're charging a "fee" of $4744! When I call to initiate the rehab process, can I negotiate these fees down or eliminate them? I mean that's 25% of the loan!

I really want to make things right and get on a steady payment plan. What plan of action do you suggest? Any help would be greatly appreciated!

If you're filing BK, you won't be able to rehab your loans. During your BK, the loans will be put into forebearance and they will not accept payments.

Have you had your 341 yet?

The collection fee is charged by the guarantey agency, not the collection agency. Collection cost up to 25% are standard on all defaulted student loans and are set by law. Some guarantey agencies waive them upon completion of the rehab. Others dont.

Oh wow, I didn't know that. I'm filling out all the paperwork for my lawyer presently. I'll turn those in on Friday and then I believe my lawyer will set up the 341 meeting at that point, maybe a month from now?

So do I have to wait till I'm discharged before I can start rehabing my loans? Maybe three months from now? (approximately)

Thanks Lynn. So in my case, is the guarentee agency the US Department of Education and the collection agency West Asset Management? From your experience, do you think I have a decent chance of getting these fees reduced or eliminated?

Oh, also: What action should I take communicating with these student loan collection agencies at this time? I don't want to blow them off for another 3 months while my BK is going through.

Thanks again for your help.

Unfortunately during your bankruptcy stay, the CA is forbidden to talk with you. Generally once an account is coded BK, it is closed and returned to the client. Once the BK is discharged, the DOE will more than likely place the account back an agency. Agency placements are random.

Yeah, you're going to have to get out of the BK through discharge before the CA will talk to you. As soon as you've been discharged, I would log onto the nslds site and see who has your loan. It may take a couple of weeks to get assigned to a new CA, but keep an eye out.

Truly, the sooner you start rehab, the sooner you will be finished. Good luck!