Hi:

I have over $70,000 in defaulted student loans (Stafford and SLS) -- principal, interest and collection fees. They are with the Debt Collection Service of the DOE. I defaulted in 1996.

I originally borrowed $30,000 in the early 90’s. Spotty employment right after graduation, then years of cancer + treatments and not coping with things well during this time. Loans passed from CA to CA for a while, then I didn’t hear anything from anyone for years. Now a new CA is calling, I have not returned their calls yet. I just got my info at nslds, and am learning since I found this board. For which I am grateful.

The good news is I’m still here and OK for now, and working fulltime, about $27,000/yr. Have some small IRAs and savings but even if I wipe them out, I’m guessing nowhere near enough to settle this debt. I’m now 53 years old, and it’s just me and my 2 cats.

The student loans fell off my CR some time ago. In last few years I have managed to pay all my back taxes, and non-covered medical and other expenses I put on CCs during illnesses. My credit score is 775. I have partly 1099 and partly W2 income, my tax refund was taken twice, but no wage garnishments so far.

Whatever the future holds, just hoping to avoid the most dire consequences of this debt, pay something I can afford, and protect my credit, to the extent that’s possible.

Initial questions:

1) Is it correct that my best bet is to call the CA and say I want to rehab, then after rehab and loan is sold, consolidate? If so, is it true that I will have to pay 1% of 70,000 as a monthly payment in rehab? I would have to borrow more to do this. Anything else I should know/say/prepare for when I call them?

2) Are the loans going to reappear on my credit report once I am rehabbed and paying on a new loan? Or are they past history. I wasn’t clear about this from my readings.

Thanks for listening, greatly appreciate any input

Squeakster

Hi again:

I am planning to call the CA this week and ask how much they want to settle and also how much to rehab. I don’t see settlement as an option, but I do want to know what that figure would be.

My income since I graduated has been almost all 1099. I recently took a new second job as a salaried employee, but have not yet received any notification of AWG. Will calling the CA to work something out at this time either prevent AWG or prompt it. Or is that just automatic.

Since first posting I read more info that seems definitive about reporting for old loans -- that once they have fallen off my CR due to age, they cannot reappear if I rehab or settle, but that they will reappear if I consolidate, because that is a new loan. Then I read something else that says that these could be reported for up to 14 years. Just want to know what to expect.

In my situation, I totally understand that my credit score is insignificant compared to finding 1) a way out of default, and 2) a payment plan that is and will continue to be affordable.

I’ve been reading here for two weeks every free moment I have, and it has been very helpful. I feel slightly less terrified and more aware/realistic than I was. I think I am strong enough now to pick up the phone. Still, I would be grateful for anyone’s advice/input based on my particulars. Thanks.

Squeakster

Rehab only removes the default notation/TL. The original negatives from original lender will remain.

Don't forget either, that even when they do age off your CR, it doesn't mean they are no long collectable because they ARE.

I just made my 9th rehab payment last month and I can tell you I honestly wish I had done it years ago!!

If you rehab, the loans will reappear as new tradelines.

Can someone explain to me why he would want to pay on these loans if its not on his CR and CAs aren't looking for him? Is he saying that they are collecting (taking his tax refunds)?

Because there's no SOL for SLs. They can -- and will -- come after you forever on these. I've seen posters on here who have defaults from the '70s and '80s who are just now hearing from CAs on their loans. They can take your tax returns, garnish your wages, or get a judgment, even years later. Also, if they have not yet been subrogated by the DOE, that can happen and the 7 year reporting period can start all over again once that happens. While you're in default, you're also ineligible for any type of federal aid (FEMA, SBA, FHA, additional SLs, etc.) or federal (and some state/local) jobs or government licenses.

Lots of bad things at their disposal completely unrelated to the CR reporting, unfortunately!

Hi, Kybosh. Actually I think my loans are subrogated by the DOE (they show as being held by the DOE on my nsdsl report?)…but my understanding is even after they have aged off my CR, if I rehab they will reappear during that period, and after, whether I consolidate or not, my pristine credit will be affected forever. But that’s the least of my worries. As Ziggy points out.

I have to say I didn’t get exactly what I wanted here in the way of answers/support (dealing with this alone isn’t easy). But I educated myself enough to help me face the music and take action. I learned enough to feel clear about my options and what my preferred goal would be. I would try to settle, then if I couldn’t pull that off, I would go to Plan B or C.

My thinking is as follows: that this situation I’m in is my fault. It makes sense that I should pay something reasonable towards what I borrowed, even considering my “victim story”. Also, I’m 53 years old and been through serious health problems. I don’t see tomorrow as a given, or the future as some endless road. What’s left of my life will not be happy if the government is up my butt 24/7 and my finances/credit/life are weighed down. I could move to another country, but do I always want to think of myself as “the person who moved to another country to avoid prosecution for their own stupid decisions?” No. My self-concept is important to me. And stress tears down your life and your immune system. I am in a healing mode, and all this time I have been in denial, I know this problem has been a serious stressor.

So, I will tell you what happened in the last 48 hours.

First, I called several people close to me and confessed that I had this long-standing problem and wanted to solve it. I told them about my options, and just asked for their emotional support. Because I am someone who NEVER asks for help, this was hard and embarrassing for me. And surprising to them. Everyone offered to help me in whatever way they could.

Then I called the CA. I talked rehab, but hinted at settlement (in the last week of the month). I was turfed from a lackey to a supervisor, who after some negotiation, offered to write off all collection costs and more than 50% of the interest. I knew from my reading here that this was probably the best I could do. She faxed me a settlement offer good for ten days, but asked for $8,000 upfront. Once I did that (on a credit card), she knew I was serious. She said if I couldn’t get the money together in time, she’d extend the deadline. And if I couldn’t get the money together at all, the $8,000 could be applied to a rehab deal.

In the last two days: I have cashed out my meager savings; one family member made me a loan at no interest, another at small interest with a promissory note. Another wrote me a check for $12,000 as a gift. I now have the whole settlement amount from all sources in the bank, ready to send to the DOE. So…this problem I have had for ten years is now history.

I realize not everyone has people to ask for help, or who will give help, and I feel very blessed that I have that, when I asked. I now owe lots of money to friends/family going forward. But I can always make more money. Maybe this is not what someone else would choose to do in a similar situation. But today, I feel free, and very good about what I have done. Thanks and

Cheers,

Squeakster

Just keep in mind that you will receive a 1099 for all the written of portion of this loan.

Thanks Lynn. Yes I knew about the cancellation of debt going in from my reading here. And I noticed how they didn't mention it when I specifically asked for all the details...

It is not a matter that they don't mention it...most collectors do not know this detail. I did not find out about this until I was in management.

Wow - what an enjoyable thread. It's nice to see someone finding positive ways to face and deal with a problem that many would think to be insurmountable.

Thank you for sharing it.

Freedom from SL's!! Doesn't get better than that.

Best of luck to you!

Good Job!!!

Congrats OP. I wish I was payed in full
$24,000 to go for me

Just want to say thanks to all here who helped me in my time of need; some with cold hard facts, and others who just took the time to post supportive thoughts. Every post was important to me. I have no reason to hang out here anymore, so as I take leave, just want to express my gratitude. And say that wherever you come from, whatever situation you’re in, we are all in some **** student loan boat. What I wish and pray for all who read this is: clarity, reason, knowledge, self-esteem, and the best possible outcome for your particular situation. Thanks and

Cheers,

Squeakster