OK, I just found this place (luckily!!) as the wife is talking about consolidating her defaulted student loans. So, I see that rehab is a much better scenario before consolidation, as it will help the credit report.
She has a total of 4 stafford loans, two subsidized and two unsubsidized, across two separate lenders. All four loans are showing defaulted as of 2004. I've gotten the 800#s from the DOE web page, and am about to take the next step and call to negotiate.
Is there anything that will help us get these rehabbed? Is rehab something that the creditor must accept? Is there anything I need to be aware of as far as what NOT to say? I've got a decent job and we're banking a fair amount of capital each month, so we can afford to make some decent sized payments, but I don't know ANYTHING about this whole student loan thing, other than they're going to keep taking my tax refund until it's paid up.
Full Version: Student Loan Rehab
OK - so from what I've now read (went about 10 pages back or so), I need to talk to the guaranty agency, rather than the original creditor to get rehab set up. And it's something that's somehow mandated and they'll have to let us do it.
What are the laws in regards to privacy? We're married, but I assume I can't just call them and set this up myself, I'm going to have to have my wife do that. She's afraid of the whole process and I'd like to just handle it, but since the loans are in her maiden name, we'll probably just have to sit down together and get on the speakerphone or something.
Thanks for such a great resource, sorry for posting such basic questions, I'd read a lot, but obviously not enough!!
What are the laws in regards to privacy? We're married, but I assume I can't just call them and set this up myself, I'm going to have to have my wife do that. She's afraid of the whole process and I'd like to just handle it, but since the loans are in her maiden name, we'll probably just have to sit down together and get on the speakerphone or something.
Thanks for such a great resource, sorry for posting such basic questions, I'd read a lot, but obviously not enough!!
Privacy: they may or may not be able to release info to references and "immediate family", depending on when the loan was taken out and the terms of the original promissory note.
Regardless of whether or not they can release information to you, only the borrower can enter a rehab agreement.
When the loan is rehab'd and sold to a lender for servicing, only she can change the payment plan, sign a forbearance agreement, or authorize a consolidation. She might as well learn how to handle her student loans herself:)
Good luck!
Regardless of whether or not they can release information to you, only the borrower can enter a rehab agreement.
When the loan is rehab'd and sold to a lender for servicing, only she can change the payment plan, sign a forbearance agreement, or authorize a consolidation. She might as well learn how to handle her student loans herself:)
Good luck!
Well, since I had a day off 
on Friday, we called the collection agency and got the loan rehabbed. Thing is, though - the person we were speaking with said it was a 12 month program rather than 9? 
After 6 regular payments, title 4 rights are restored, but it's 12 months before the loan status changes from defaulted. Has something changed? It's not a huge deal, the wife is VERY happy about having it taken care of and cleaning up her credit report. I'm not quite as stoked, because now I have $500 less every month for savings and goodies!!
on Friday, we called the collection agency and got the loan rehabbed. Thing is, though - the person we were speaking with said it was a 12 month program rather than 9? After 6 regular payments, title 4 rights are restored, but it's 12 months before the loan status changes from defaulted. Has something changed? It's not a huge deal, the wife is VERY happy about having it taken care of and cleaning up her credit report. I'm not quite as stoked, because now I have $500 less every month for savings and goodies!!
QUOTE(foxmid @ May 26 2007, 10:46 AM) 
Well, since I had a day off on Friday, we called the collection agency and got the loan rehabbed. Thing is, though - the person we were speaking with said it was a 12 month program rather than 9?
It requires 9 payments to rehab...however sometimes an additional 1-2 need to be made while the loan is being funded. Just don't stop paying until you receive notice that the rehab has gone thru.
After 6 regular payments, title 4 rights are restored, but it's 12 months before the loan status changes from defaulted. Has something changed? It's not a huge deal, the wife is VERY happy about having it taken care of and cleaning up her credit report. I'm not quite as stoked, because now I have $500 less every month for savings and goodies!!
on Friday, we called the collection agency and got the loan rehabbed. Thing is, though - the person we were speaking with said it was a 12 month program rather than 9? It requires 9 payments to rehab...however sometimes an additional 1-2 need to be made while the loan is being funded. Just don't stop paying until you receive notice that the rehab has gone thru.
After 6 regular payments, title 4 rights are restored, but it's 12 months before the loan status changes from defaulted. Has something changed? It's not a huge deal, the wife is VERY happy about having it taken care of and cleaning up her credit report. I'm not quite as stoked, because now I have $500 less every month for savings and goodies!!
QUOTE(LynnInMN @ May 26 2007, 03:35 PM)
It requires 9 payments to rehab...however sometimes an additional 1-2 need to be made while the loan is being funded. Just don't stop paying until you receive notice that the rehab has gone thru.
Unless it's a Perkins loan. They require 12. On a Stafford, PLUS, Consol, etc it's 9 and then another 2-3 while awaiting repurchase.
I have seen loans rehabbed with 15 payments on the counter before though- some borrowers are upset that their loan got sold since they were dealing with Windham or whatever and worked out arrangements they liked:)
I'm trying to find out who to contact to enter rehab - my wife has numerous loans sold to CA (including Pioneer)
QUOTE(srmcglothlin @ May 30 2007, 12:10 PM)
I'm trying to find out who to contact to enter rehab - my wife has numerous loans sold to CA (including Pioneer)
What we did was contact the NSLP number, and they gave us the phone # to the CA that had the account. The CA was very nice and easy to work with. The amounts the loan had increased to was much more than was showing on the NSLP website though, so the rehab payments were somewhat sticker-shockish.
Hope that helps. My wife's loans were all Stafford loans, don't know if it's different with other loan types, YMMV.
QUOTE(srmcglothlin @ May 30 2007, 02:10 PM)
I'm trying to find out who to contact to enter rehab - my wife has numerous loans sold to CA (including Pioneer)
Student loans are never sold to CA's. Pioneer is a CA who handles both defaulted FFELP and DOE loansl. You should be contacting them.
OK - so we just got the paperwork on the loan rehab. And there's a clause in here that is unexpected and quite scary!!
So, if the loan has increased to 50K, they're going to add 18.5% in collection costs to increase it by nearly 10K just for rehabbing it?!?! Am I missing something? I thought some money was supposed to come OFF of the loan because we're now doing the right thing. I'm confused here.
Then, the next bullet point says
This just means they're going to change the principal amount to include the interest, right?
And finally, the last point says
So, either we agree to the 18.5%, of it will be 20%? What a bargain...
Help! Are the collection fees negotiable? Are they trying to scare us? It's working!
QUOTE
Collection fees of 18.5% will be added (capitalized) to the outstanding principal balance due on your account upon rehabilitation. The 18.5% fee will be based on the unpaid principal and accrued interest outstanding at the time of rehabilitation
So, if the loan has increased to 50K, they're going to add 18.5% in collection costs to increase it by nearly 10K just for rehabbing it?!?! Am I missing something? I thought some money was supposed to come OFF of the loan because we're now doing the right thing. I'm confused here.
Then, the next bullet point says
QUOTE
The lender may capitalize the outstanding accrued interest due on your account upon rehabilitation
This just means they're going to change the principal amount to include the interest, right?
And finally, the last point says
QUOTE
Refusal to agree to the capitalized collection fees for the Rehabilitation Program does not remove NSLP's authority to assess charges to cover the costs incurred in collecting your defaulted loans. These charges are currently 20%. Your loan will remain in default status if you refuse to the terms discussed
So, either we agree to the 18.5%, of it will be 20%? What a bargain...
Help! Are the collection fees negotiable? Are they trying to scare us? It's working!
QUOTE(foxmid @ Jun 1 2007, 10:05 AM)
OK - so we just got the paperwork on the loan rehab. And there's a clause in here that is unexpected and quite scary!!
Mmmhmm....
So, if the loan has increased to 50K, they're going to add 18.5% in collection costs to increase it by nearly 10K just for rehabbing it?!?! Am I missing something? I thought some money was supposed to come OFF of the loan because we're now doing the right thing. I'm confused here.
The right thing for your credit. But even then only one of the tradelines will come off, the other will report for the full seven years as required by the HEA if I am not just flat out wrong. I'm sure someone will correct me if I am. The reason, of course, that they are adding 18.5% is because they can, since you did the wrong thing by letting it go into default in the first place.
Then, the next bullet point says
This just means they're going to change the principal amount to include the interest, right?
I believe that is the meaning of capitalization, yes.
And finally, the last point says
So, either we agree to the 18.5%, of it will be 20%? What a bargain...
The time to get a bargain has long since passed. Default on student loans is a bad thing, and there are penalties. The problem is, the longer you wait to fix it, and the more you run from it, the worse it will get. You're doing the right thing, but the right thing should have been done long ago.
Help! Are the collection fees negotiable? Are they trying to scare us? It's working!
QUOTE
Collection fees of 18.5% will be added (capitalized) to the outstanding principal balance due on your account upon rehabilitation. The 18.5% fee will be based on the unpaid principal and accrued interest outstanding at the time of rehabilitation
Mmmhmm....
So, if the loan has increased to 50K, they're going to add 18.5% in collection costs to increase it by nearly 10K just for rehabbing it?!?! Am I missing something? I thought some money was supposed to come OFF of the loan because we're now doing the right thing. I'm confused here.
The right thing for your credit. But even then only one of the tradelines will come off, the other will report for the full seven years as required by the HEA if I am not just flat out wrong. I'm sure someone will correct me if I am. The reason, of course, that they are adding 18.5% is because they can, since you did the wrong thing by letting it go into default in the first place.
Then, the next bullet point says
QUOTE
The lender may capitalize the outstanding accrued interest due on your account upon rehabilitation
This just means they're going to change the principal amount to include the interest, right?
I believe that is the meaning of capitalization, yes.
And finally, the last point says
QUOTE
Refusal to agree to the capitalized collection fees for the Rehabilitation Program does not remove NSLP's authority to assess charges to cover the costs incurred in collecting your defaulted loans. These charges are currently 20%. Your loan will remain in default status if you refuse to the terms discussed
So, either we agree to the 18.5%, of it will be 20%? What a bargain...
The time to get a bargain has long since passed. Default on student loans is a bad thing, and there are penalties. The problem is, the longer you wait to fix it, and the more you run from it, the worse it will get. You're doing the right thing, but the right thing should have been done long ago.
Help! Are the collection fees negotiable? Are they trying to scare us? It's working!
I doubt they are negotiable. My SO had a couple of student loans in default and about five more through another lender in forebearance. I suppose we could have rehabbed the loans that were in default but it would have taken forever and it wouldn't have really helped my SO's credit very much anyway since one of those two (the OC or the CA, can't remember which) will report for the full seven years even after rehab.
What I suggest you do at this point is get a list of all of the student loans, what type each loan is, what the status of each loan is, and the balance of each loan, as well as which CA is holding which loan right now. I know some lenders can consolidate loans in default, but I am not sure it would apply to your situation without those details. Consolidating while in default might not be the easiest thing on your credit but it will be a lot easier on the wallet and you'll probably have more options as to how to begin paying on the total balance rather than trying to deal with 5 monkeys at a time, if you take my meaning. Get ready though, if you have $50k in loans all in default now this isn't going to be fun for a long time.
I hope that gives you a sense of how you can find out what to do.
So, upon further searching and reading through the forum, the only loan types that get some of the collection costs refunded are FDLP type loans. Evidently, since these are Stafford loans, they're FFELP or some other acronym loans, so that doesn't wash.
So, now I'm in the hole for 60K worth of education that I never received. May be time for a divorce
Thanks for the help.
I'm seriously beginning to consider just consolidating the loan, of course that would mean the wife wouldn't be able to get on the title when we buy a house, since her credit is never going to be repaired. I imagine the collection costs will be added on either way, right? Wondering if I should just settle, and clean out all of my retirement accounts and pay it off entirely.
I can't imagine the CA would even want to settle, they know they can hold it over her head forever, and eventually she'll have to go back to work and they'll nail her. I just don't know what she was thinking, taking this large of a loan out for a degree that is basically useless to her.
So, now I'm in the hole for 60K worth of education that I never received. May be time for a divorce
Thanks for the help.
I'm seriously beginning to consider just consolidating the loan, of course that would mean the wife wouldn't be able to get on the title when we buy a house, since her credit is never going to be repaired. I imagine the collection costs will be added on either way, right? Wondering if I should just settle, and clean out all of my retirement accounts and pay it off entirely.
I can't imagine the CA would even want to settle, they know they can hold it over her head forever, and eventually she'll have to go back to work and they'll nail her. I just don't know what she was thinking, taking this large of a loan out for a degree that is basically useless to her.
QUOTE(foxmid @ Jun 1 2007, 12:42 PM)
So, upon further searching and reading through the forum, the only loan types that get some of the collection costs refunded are FDLP type loans. Evidently, since these are Stafford loans, they're FFELP or some other acronym loans, so that doesn't wash.
Stafford loans = government-backed student loans. These can be offered directly from the government (FDLP) or through private lender (FFELP). Your school makes that determination (for example, my school participated in direct loans, so that's who my lender was).
FDLP = Federal Direct Loan Program. These are directly from the Department of Education without any private lender involvement
FFELP = Federal Family Education Loan Program. These are Stafford loans that are received through a private lender (Sallie Mae, Citibank, Chase, etc.)
So, now I'm in the hole for 60K worth of education that I never received. May be time for a divorce
Thanks for the help.
I'm seriously beginning to consider just consolidating the loan, of course that would mean the wife wouldn't be able to get on the title when we buy a house, since her credit is never going to be repaired. Absolutely not. SLs don't have a collection SOL, but they do have reporting SOL. They will fall off of her report and, even when they're on there, they'll have less and less of an effect (if you consolidate instead of rehab, I mean) as time goes on. I consolidated instead of rehabbing (don't ask -- bad, bad CA!!) almost 5 years ago and I've started being offered prime CCs and my score is nearing 700 (if you check on the mortgage forum, they can answer this part even better -- Fla-Tan, the moderator over there, also used to be a moderator of this forum, so he's very knowledgeable about all of this!). It won't look *good* in the meantime, but it certainly won't trash her credit permanently at all -- they will drop off 7 years after the default was paid. I imagine the collection costs will be added on either way, right? Yup. Wondering if I should just settle, and clean out all of my retirement accounts and pay it off entirely. I wouldn't recommend it. I am a HUGE retirement savings advocate and I won't bore you with the details (I work in pensions), but that would have drastic consequences for you (magic of compounding, tax consequences of early withdrawal, etc.). It could very, very likely end up costing you more than the 18.5% in the future.
I can't imagine the CA would even want to settle, they know they can hold it over her head forever, and eventually she'll have to go back to work and they'll nail her. I just don't know what she was thinking, taking this large of a loan out for a degree that is basically useless to her.
Stafford loans = government-backed student loans. These can be offered directly from the government (FDLP) or through private lender (FFELP). Your school makes that determination (for example, my school participated in direct loans, so that's who my lender was).
FDLP = Federal Direct Loan Program. These are directly from the Department of Education without any private lender involvement
FFELP = Federal Family Education Loan Program. These are Stafford loans that are received through a private lender (Sallie Mae, Citibank, Chase, etc.)
So, now I'm in the hole for 60K worth of education that I never received. May be time for a divorce
Thanks for the help.
I'm seriously beginning to consider just consolidating the loan, of course that would mean the wife wouldn't be able to get on the title when we buy a house, since her credit is never going to be repaired. Absolutely not. SLs don't have a collection SOL, but they do have reporting SOL. They will fall off of her report and, even when they're on there, they'll have less and less of an effect (if you consolidate instead of rehab, I mean) as time goes on. I consolidated instead of rehabbing (don't ask -- bad, bad CA!!) almost 5 years ago and I've started being offered prime CCs and my score is nearing 700 (if you check on the mortgage forum, they can answer this part even better -- Fla-Tan, the moderator over there, also used to be a moderator of this forum, so he's very knowledgeable about all of this!). It won't look *good* in the meantime, but it certainly won't trash her credit permanently at all -- they will drop off 7 years after the default was paid. I imagine the collection costs will be added on either way, right? Yup. Wondering if I should just settle, and clean out all of my retirement accounts and pay it off entirely. I wouldn't recommend it. I am a HUGE retirement savings advocate and I won't bore you with the details (I work in pensions), but that would have drastic consequences for you (magic of compounding, tax consequences of early withdrawal, etc.). It could very, very likely end up costing you more than the 18.5% in the future.
I can't imagine the CA would even want to settle, they know they can hold it over her head forever, and eventually she'll have to go back to work and they'll nail her. I just don't know what she was thinking, taking this large of a loan out for a degree that is basically useless to her.
Hope this helps! Good luck!!
Edited to correct an incorrect reference!!
QUOTE(foxmid @ Jun 1 2007, 12:42 PM)
So, now I'm in the hole for 60K worth of education that I never received. May be time for a divorce. Thanks for the help.
I would be very careful of what you sign right now. Read everything carefully. I do understand the complicated feelings that can arise from this problem, however. If in any doubt don't sign it.
I'm seriously beginning to consider just consolidating the loan, of course that would mean the wife wouldn't be able to get on the title when we buy a house, since her credit is never going to be repaired. I imagine the collection costs will be added on either way, right? Wondering if I should just settle, and clean out all of my retirement accounts and pay it off entirely.
Look up Direct Loans for consolidation. That's the DOE, basically. As far as putting her on the title of the house, if you are financing it, she can be placed on the title after the fact. This would give her a stake in ownership of the home without owing any of the debt. I can't say I'd do that. You could own the house and she could live there, of course, without being on the title. If everything is good between you two then the title is just paper. I wouldn't touch my retirement funds for someone's college debt, but that's me. The agreement for consolidation my SO has forgives anything not paid after 25 years.
I can't imagine the CA would even want to settle, they know they can hold it over her head forever, and eventually she'll have to go back to work and they'll nail her. I just don't know what she was thinking, taking this large of a loan out for a degree that is basically useless to her.
On the bright side the maximum effect of nailing is generally a garnishment. Other people here in various parts of CB can probably help you with information about how to protect what you both have so that life goes on. I would suggest you help her deal with the problem as a matter of common good, and work out the best solution you can without putting yourself in trouble. You cannot kill what you did not create.
I would be very careful of what you sign right now. Read everything carefully. I do understand the complicated feelings that can arise from this problem, however. If in any doubt don't sign it.
I'm seriously beginning to consider just consolidating the loan, of course that would mean the wife wouldn't be able to get on the title when we buy a house, since her credit is never going to be repaired. I imagine the collection costs will be added on either way, right? Wondering if I should just settle, and clean out all of my retirement accounts and pay it off entirely.
Look up Direct Loans for consolidation. That's the DOE, basically. As far as putting her on the title of the house, if you are financing it, she can be placed on the title after the fact. This would give her a stake in ownership of the home without owing any of the debt. I can't say I'd do that. You could own the house and she could live there, of course, without being on the title. If everything is good between you two then the title is just paper. I wouldn't touch my retirement funds for someone's college debt, but that's me. The agreement for consolidation my SO has forgives anything not paid after 25 years.
I can't imagine the CA would even want to settle, they know they can hold it over her head forever, and eventually she'll have to go back to work and they'll nail her. I just don't know what she was thinking, taking this large of a loan out for a degree that is basically useless to her.
On the bright side the maximum effect of nailing is generally a garnishment. Other people here in various parts of CB can probably help you with information about how to protect what you both have so that life goes on. I would suggest you help her deal with the problem as a matter of common good, and work out the best solution you can without putting yourself in trouble. You cannot kill what you did not create.
My SO was thinking college automatically improves life. YMMV. SO thinks differently now!
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