This is for my son who has defaulted on a Sallie Mae loan. It is at a law firm/collection agency and they are calling all the relatives telling them about the default and attempting to locate my son even though Sallie Mae has his correct address and phone number.

What I am confused about is this. The law firm/collection agency appears to be a JDB that specializes in very old debts they have purchased. Is it possible for a Sallie Mae debt to be sold to a CA? Or, are they just collecting for Sallie Mae?

Second, after the debt goes to a CA. is it still possible to rehab the loan, or is it too late?

Third, can he settle with them (after validation), or are they required to hold out for the entire amount?

So far the research I have started that these guys are thugs. I am recommending that he get a tape recorder to tape his calls because they seem to commit a lot of violations in their phone calls. He has to answer his phone because it is also his business phone.

Thanks

The answers to all your questions depend on whether this is a federal or private loan. Sallie Mae issues both kinds.

Q Is it possible for a Sallie Mae debt to be sold to a CA? Or, are they just collecting for Sallie Mae?
A If it is a private loan it can be sold to a CA, or a CA could collect for SLMA or their insurer. If it is a federal loan it would now be owned by a guaranty agency or the Department of Education. They could hire a CA, but the CA would not own the loan.

Q Second, after the debt goes to a CA. is it still possible to rehab the loan, or is it too late?
A If it's a federal loan it could be rehabbed, and he would do it with the CA. If it's a private loan he is not entitled to rehab.

Q Third, can he settle with them (after validation), or are they required to hold out for the entire amount?
A If it's a private loan it's up to them. If it's federal it cannot usually be settled, although, within certain guidelines, ED or a guarantor may choose to compromise. No defaulted federal loan borrower has any right or entitlement to settle for less then all principle, interest, and collection costs.



If it is a federal loan they may not be breaking any law by discussing the debt with the borrowers family or the references he used when he took out the loan.

Thanks. That was a great answer. He has his own business now and is doing well. I know his bank account is doing well and I would hate to see that all go to a CA all of a sudden. I have urged him to work with Sallie Mae and rehab it in the past but he has not done anything. Maybe the account going to a CA will wake him up.

Is it true that if it is a government loan that they can seize 25% of his salary without a judgement? What about other assets?

What's a "JDB?"

Administrative wage garnishment allows 15% of disposable income (gross- minus taxes only) for 1 defaulted loan, up to 25% for 2 or more loans. No judgment required. Can offset 100% of tax refunds. Can also offset other federal payments. All of these apply only to federal loans.

JDB = Junk Debt Buyer

He just recently started doing well financially. He always had more potential, but he worked enough to pay the rent and utilities (and ignore the rest) and do what he wanted. Now he is finally getting to be more responsible. He is taking all the work he can get and most weeks is working long hours. Next step is to start to deal with these long forgotten problems.

I am here trying to get some advice to pass on to him to point him in the right direction. He is clueless as to credit repair. He lives modestly and frankly I don't know where his money goes.

A lot depends on the type of student loan, if it is a private loan, only a servicing error, and a very high level of management can get it back from charge off status. In this case, it is probably not a JDB, but a salliemae owned entity that is collecting on the debt, this means that they are not subject to FDCPA as a first party.

If it is a ffelp loan, there are a lot of options, and he should consider them. Rehab is realitivly easy, and will prevent the administrative garnishment process. Understand that FFELP collections are a very different critter than most everything else on this board, the administrative garnishment process is frequently required by quotas set by agencies, collectors will move towards that if you don't work with them. Also the agencies generally get their business based upon their resolve rate with the dept of ed, the agencies that do better get more business...that means they are very competitive and good at what they do.

It's not a lost cause, rehab is a good option. I'd suggest you try to step in with your son and setup a rehab program w/ the collections agency. If you can't get to that point, I would try to legally move the business assets away from the personal assets.