Last week I arranged rehabilitation on a Perkins loan with the Assistant Controller/Loan Coordinator at the school. We agreed on $65/mo and she sent the rehab forms, which I faxed back, and I made the first payment by EFT. The next day she emailed me acknowledging reciept of the forms and payments and just asked me to mail her a hardcopy of the signed form.

But today I recieved the following email from her:

Hi [kmol],

I realized that a Rehab alone will not help you very much because your account is 64 months past due. You will need to pay all the past due interest ($1,561.95) plus the interest that will accrue in the next 12 months ($24.03x12= $288.36)at the end of your Rehab period.

Since you have not used any deferments you are entitled to, I suggest that we look at applying both an Unemployment deferment and Economic Hardship deferments on your account.Attached please see a brief description on the different types of deferments we offer. I am also sending you an Unemployment Deferment form and an Economic Hardship deferment form.

If you agree that this is what you would like to do, please fill out both forms and send them back to me electronically and then by mail. You can also mail to me the proof of income required for your Economic Hardship deferment.

Here is what I suggest. We apply of 36 mths of an Unemployment deferment (fill out a form and sign it, just as with the Rehab form) then you apply for an Economic Hardship deferment (about 28 mths) this will bring your account to a current status and then you will continue to make your $65.00 monthly payments, consistently for 12 months. At the end of that time we can Rehab your loan and help clear your credit .

Please let me know your thoughts.
[name deleted]
Assistant Controller/Loan Coordinator


I'm confused by this and will contact her, but wanted to get some advice first.
I never said I was unemployed or had economic hardship. Why wouldn't I be able to rehab as we agreed in writing, and why is she suggesting I defer retroactively?
Can this loan not be Rehabbed because it was never handed to to collections? (Its still with the school)
If as she writes, the forms would bring my account to a current status, what is the point of rehabbing after that?
Should I just do as she says if it means my account will be brought to a current status?
Also she told me the loan was 64 mo.s past due in our initial conversation, so I don't know why she's just 'realizing' she has to change the arrangment (although she didn't strike me as very experienced.)

I do not know what she is trying to pull on you, but nowhere in the Higher Education Act does it require that you make up all past due interest. My only thought is maybe somewhere they screwed up on the due diligence of the loan...but it is only a thought. Try quoting the HEA to her.... Also when you are in default, you are not eligible for deferements or forebearances...this lady sounds like she doesnt know what the heck she is talking about!!!

Also ....what school was this for???? Most schools have their rehab policy on their websites!

1998 Amendments to the Higher Education Act of 1965
P.L. 105-244


TITLE IV--STUDENT ASSISTANCE
PART E--FEDERAL PERKINS LOANS
SEC. 464. TERMS OF LOANS
`(h) REHABILITATION OF LOANS-

`(1) REHABILITATION-

`(A) IN GENERAL- If the borrower of a loan made under this part who has defaulted on the loan makes 12 ontime, consecutive, monthly payments of amounts owed on the loan, as determined by the institution, or by the Secretary in the case of a loan held by the Secretary, the loan shall be considered rehabilitated, and the institution that made that loan (or the Secretary, in the case of a loan held by the Secretary) shall request that any credit bureau organization or credit reporting agency to which the default was reported remove the default from the borrower's credit history.

`( COMPARABLE CONDITIONS- As long as the borrower continues to make scheduled repayments on a loan rehabilitated under this paragraph, the rehabilitated loan shall be subject to the same terms and conditions, and qualify for the same benefits and privileges, as other loans made under this part.

`© ADDITIONAL ASSISTANCE- The borrower of a rehabilitated loan shall not be precluded by section 484 from receiving additional grant, loan, or work assistance under this title (for which the borrower is otherwise eligible) on the basis of defaulting on the loan prior to such rehabilitation.

`(D) LIMITATIONS- A borrower only once may obtain the benefit of this paragraph with respect to rehabilitating a loan under this part.

Thanks very much Lynn. I PM'd you the name of the school. There is no rehab info on their website. I will call them when they open and let you know what happens -- meanwhile I wanted to give you a little more info / ask a couple more questions.

When she first pulled up my account, she said "It looks like this is marked to go to collection (DOE?)" I said I don't want that to happen and could we set up rehab, and we did.

Could it be that she now realizes that the account should have gone to collections long ago but they screwed up? And now they're trying to fix the paperwork so they protect their default rate?

Or she realizes she agreed to too small a monthly fee? She suggested $65/mo on a $7415 balance.

One thing that concerns me is that if I just say "No, I insist on the rehab as we agreed," she will just assign it to the DOE and say it should have been assigned long ago. Or that she could add collection fees to the amount due.

Here are more details about the loan from the NSLDB:

Loan Amount $6000
Outstanding Principal $5766
Principal bal as of Date 8/24/2000
Outstanding Interest Balance $0
Outstanding Interest Bal as of Date (blank)
Interest Rate 5%
Canceled Amount $0
Canceled Date (blank)

Statuses:
DF 02/01/2004
RP 05/01/2003
DF 12/01/2002
RP 09/01/2001
DF 06/01/2001
RP 03/01/2000
ID 07/01/1997

This info is from my account summary on the ACS website:

Last payment date Aug 24, 2000
Outstanding Principle $5766
Payoff Amt $7,415.19


Thanks again....

Yeah I think the school is trying to cover its ass on this one. When an account is subrogated to the USDOE, they are reimbursed at a discount, so the school looses money on the transaction. It also goes against their cohort default rate...too many defaults and accounts not properly maintained can lead to them being kicked out of the student loan program. Stick to your guns...and tell them that you will contact the student loan ombudsman if necessary. They already screwed themselves with the written agreement.

Lynn are you sure that since the loan is defualted there's no way she could apply these deferments? If she could apply these deferments and remove $1,561.95 in interest from the loan, should I consider it? Wouldn't it make my report show the loan current the same way rehab would, and then I could just carry on paying the monthly amount originally stipulated in the loan agreement?

Not unless they are fudging things.

from experience, if deferments or forebearances are applied retroactively, you keep all the lates and interest accumulated. I had a deferment processed where they lost the form 2X and caused me to be late because they didn't notify me it was missing until after the payment was due. I had sent that form CMRRR to my lender and could show they received it but it got misplaced at the lender. Itried to get them to remove the late because they had the form just misplaced it. I was denied the late removal because the form was not in the right area, even though it was mailed back to the address they specified.

I would just rehab myself and save the deferments in case it was needed later. You are limited on the time you can have a deferment or forebearance

The schools are not suppose to use deferemnts and or forebearances when the loan is in default 60 months. I just IM'd my old office mate at the U. She handles Perkins on a daily basis as she is the CA liason. She agrees that if the school was stupid enough to put the agreement in writing, force them to stick by it. She says to follow the rehab rules, as the end result will benefit the borrower with lower payments and a repaired CR.

OK I emailed her telling her I simply didn't qualify for the deferments, that rehabilitation doesn't require me to pay past due interest at the end of the rehab period, and that my second rehab payment of $65 will arrive by April 1. Will let you know the reply!
Thanks!

Well it's 2 weeks later and I haven't heard back from the school. In my last email I said I didn't qualify for the retroactive deferments she wanted me to fill out, and that I wanted to continue rehablilitation as agreed.

I recieved a bill from ACS Education Services today. (I had signed up to pay the school online via ACS as suggested by the school.) The bill lists my account details and includes this note:

THIS BILL IS NOW PAST DUE. UNLESS PAYMENT HAS BEEN MADE, OR CANCELLATION/DEFERMENT FORMS COVERING THIS BILLING PERIOD HAVE BEEN SENT, PLEASE REMIT.

The total amount due is $4200, and there is nothing indicating the $65/mo rehab agreement. Does this indicate that my loan is not officially in rehab and can get assigned to the DOE at any time? I have a rehab agreement from the school which included the monthly payment filled out by them. I signed this and mailed it to them. Do I need more paperwork to make it official?

If you haven't made the first payment, this may be normal. My rehab is with AES and they kept calling and sent a letter or two after I had already entered into a rehab agreement but before the first payment was made. I returned the first call thinking something might be wrong, as they didn't leave a detailed message, but they told me then just to ignore any calls and they would continue until they recieved the first payment.

If you've already made a payment, then it sounds like something might be wrong, but from what I've read and the replies you've gotten from Lynn, I don't think it's on your end. I wouldn't be afraid to call whatever contact is on that letter and tell them you are in rehab, made a payment, and offer to fax any documents you have if they don't have them.


RB73