I have three different stafford loans with three different lenders (30K, 8K, and 7K) and they are all in default for about two years. Today, I attempted to contact all but was able to talk with one, the 7K loan, which is being handled by a CA. The conversation started off smoothly with him collecting all my personal information about place of work, rent, car note, insurance, other loans, husband's info about work and banking info). I made an offer of $40 a month b/c that is all I can afford to pay on that loan with the consideration of two other huge loans. He says that is not acceptable; and the minimum they can agree on would be $130. I cannot afford that b/c we are a family of three with one income. He told me that they will use the information (glad I didn't give out my telephone number but they got three references from me though) they got to proceed with a judgement if I cannot agree to pay what they are willing to accept. A wage garnishment of up to 25% will take place once I start working. He told me at first that b/c I defaulted on the loan that I am not qualify for a rehab. program, is this true? I am discouraged from contacting the other lenders, especially the loans being much higher than this one; they will definitely want more than $130 a month. My husband also has defaulted student loans. There's no way we can afford his and mine every month. Would someone please give out tips on how to negotiate with these CA. Should I stop calling them and wait to see what they will do? BTW, the CA told me just b/c we cannot agree to a payment arrangement does not mean they won't accept any payment from me; why would I want to do that if there is no agreement?

A payment agreement is simply a verbal agreement to make payments on your loan. Making payments with or without a payment arrangement, doesnt change anything on your credit report.

To rehab, you need to make minimum payments of $50 under the reasonable and affordable clause in the higher educagtion act. Standard payments would be 1%..so $300, $80 and $70. Is your husband set up on payments already for his defaults??

Thank you everyone for replying. I think I may have used *67 when I contacted the CA. I will contact my references to let them know so they can tell them to stop calling if they start.

Please correct me if I am wrong, wage garnishment does not require a judgement, right?

So I would have to make at least a minimum of $50 under the reasonable and affordable clause. Is this per loan or per loan total per lender? I have several loans with three different lenders (30K, 7K, and 8K).

No, my husband has not set up a payment for his default loans. He wanted me to start mine first so we can later budget for his. Are they going to call him now that they know where he works? I believe most of his loans are from Dept. of Education but I am not sure if it has gone to their CA yet.

Should I contact the CA again with a $50 payment arrangement? How should I approach the other two lenders?

IMHO, you need to get your husbands loans set up ASAP to avoid his wages being garnished. Then deal with yours.

Good point Lynninmn. I will get my husband to start a rehab. program. Do you have tips on how he should approach the lender when trying to arrange a payment plan under the rehab. program? Please give your opinion on the $50 minimum payment under the reasonable and affordable clause. His student loan is about 35K.

Yikes. With your husbands balance being so high, rehab will work but his rehab payment once the program has been completed will jump to excess of $400/month. He would immediately have to turn around and consolidate. I am of the opinion that it would probably be worthwhile for both of you to just consolidate with Direct Loans now and get on the income contingent repayment plan. It wont do anything for your credit but it will give you an affordable payment.

I am glad you brought up consolidation b/c I was thinking about that also but I read a lot of topic here about rehab. being the best thing to do. How does the income contingent repayment plan work during consolidation? Gosh, the interest rate on my loans are quite high ( close to 7.9%). Isn't it an average of all the interest rate of my loans for consolidation? If I decide to go back to school, can I reconsolidate with the new loan? What do you think the average monthly payment going to be for both my husband and me? Thank you again for replying.

Just remember that consolidation will not erase the black marks from your CR. You should rehabilitate based on your income and then consolidate.
I would not consolidate before unless your main goal is NOT cleaning up your credit.

wow, i'm glad i saw this....because i'm on the tail end of rehabilitating (just made official payment #7...so i'm looking at anywhere from 2-4 more, right? depending on when the lender picks up my loan). i've been keeping tabs on my progress in the rehab program (and probably just annoying the heck out of them...asking questions about what's next). I was told that my payments will decrease anywhere from 30%-50% after i get out of the rehabilitation program. I see up there you are saying it will increase drastically.

I'm wondering is the 30%-50% decrease they are talking about based on if my loans are consolidated and i enter the income contigent program and it's stretched out over 25(?) years or is this based on the loan being over 10 years. Or was the representative telling me what I wanted to hear....or just plain uninformed.

I have a principal of over 49K, right now and over 12K in collection costs, which i was told will be removed upon completing the rehab program for my federal loans. I'm paying $445/month and while i'm doing it and have been making my payments....it's really choke-slapping me every month. I'm not able to put up as much in my savings as i would like to do.

I hope my loan payments don't go over $445 though...i'd be content with them being at $3-something. Is there something that I can do in order to have my payments less than this $445.

Lynn...you've given great advice in the past, please help. Cynic....i see you, your help is appreciated also.

I can tell you how my company handles rehab repurchases: We create a payment counter based on the loan type, and set it to the longest term permitted for that loan type (for Stafford and Perkins loans 120, for consolidation loans 180 to 360 depending on balance). Then we subtract the number of payments they made while in rehab from the counter (usually between 9 and 15) and create a schedule based on a level payment plan, unless they were given "income sensitive" rehab payments, then we use a graduated schedule. We send them a disclosure that gives them the schedule we put them on, and a form they can sign and return if they would like a different schedule. If their loan is not consolidated and they meet our balance requirement we will offer them a consolidation loan through us, and a forbearance until it's completed if needed.

I want to rehabilitate but the CA for one of my loans would not accept anything less than $130 (7K loan) monthly. I can't afford that, especially when I have two other loans which are much higher than that. Do you have tips on negotiation? I was told that $50 is the starting point for the reasonable and affordable clause. How can I convince the CA that is all I can afford? I even told him my expense and what my husband makes, but I really don't think he cares. Yours and anyone else's input in this is greatly appreciated.

You have to look at what your income is. And you also have to consider they can go straight for garnishment and will get more than $130.
With student loans they don't have to have a judgment to do that. It is the law that they can take your money. It is a federally guaranteed loan. I don't know what your income is, but $130 sounds fair on 7K.

What is your gross income? They will only take out amounts for rent and utilities and things like that. They will not take out for other loans and credit cards when figuring if you can afford your payments or not. I think they may take out for a car payment up to a certain amount but I am not absolutely sure on that one.

What is the $50 minimum payment under the reasonable and affordable clause I am hearing about? Is it possible for me to qualify for that? We are a family of three with one income of 1500 monthly.

It depends on your loan balance.
Sorry it took me so long to answer.

They have to make it reasonable and affordable... So you will have to show them your income and expenses. I would call them really and talk to them...

I know CBE was actually very nice and answered all my questions.