Greetings,

My husband has recently received a notice for a defauted student loan from over 10 years ago from a collection agency. The loan was originally with the Department of Education. It is now almost 100K. There is no possible way for us to pay this loan back. What is the worst that can happen if we do not pay?

Uh, there's a lot. You are now ineligible for most government benefits -- this means FHA mortgages, FEMA (if there's a natural disaster), SBA (small business administration), etc. If your husband were to become disabled and eligible for SS disability -- garnished. They can also garnish his paycheck for up to 15% of his after-tax income. Without a court judgment. If your husband gets a professional licensure through the state, he can be denied. They can take his tax returns, again, without a court order. Of course, they can also always go to court and get a judgment. There's also no statute of limitations - ever. Those penalties remain and they will continue to try to collect until you get out of default.

The thing is, you're looking at it as the whole chunk. You need to look at this as the individual payments (and yes, it is possible not to have to make payments of $1000 per month!). Have him call them up (it has to be him) and ask about rehab and talk to them about "reasonable and affordable payments". He may be required to include financial information to get it at a payment amount your family can afford. That doesn't mean it's not at least a little painful, though. If rehab doesn't work out, he can always consolidate it. Make sure you consolidate with the Department of Education (if you do rehab, he can consolidate with DOE after rehab is finished -- do a search for rehab on this forum for all the ins and outs of the program). The DOE allows for "income contingent" consolidation payments. They will make the payments a percentage of your take home pay (there's a calculator on DOE's consolidation page that you can play around with). If after 25 years the loan isn't paid off, they will forgive the remainder. He'll owe taxes on that forgiven amount, but it will likely be a lot less than the loan.

Hope this helps. Defaulted SLs are not things that you should take lightly (believe me -- I know from experience here !). But you can get out of it. Good luck!

Ditto, ditto, ditto!

Best of luck with resolving this. My prayers go out to you.

Thank you, that does help. We replied to the CCA letter in writing stating that there is no way we can pay and included reasons why. They then sent us a form to fill out with all of our financial info, including mine and my SS#. We have not filled it out as yet. Right now my husband is only working part time and makes very little. Most all the bills are in my name also, so we would have to include this on the form. Could they come after us and freeze our bank account, take our cars, refuse to renew passports, take him to jail, etc? We could get around them taking our tax refund becaue I am self employed and always pay. If we decide to mail in the form to CCA, can we still deal with DOE? Will this mess up my credit too?

My student loans are 47K. Some of this will be reduced because they are back dating a forebearance for me. I plan on paying what I can during my forebearance period. Then, if I am not able to make my minimum payment at that time, I will continue to send in what I can and if I default, I will just default if they won't work with me on "reasonable" payments.

My attorney told me that if I am sending in something and they are taking my income tax returns that it is hard to get a garnishment approved to go through, so he suggested I stay current in whatever amount I could afford over the next 25 years and the remaining will be forgivin. Then when I am taxed on the forgiven amount, you claim "Insolvency" on your taxes and you don't have to pay taxes on it. By claiming insolvent, you are simply stating that you did not have funds or assets to pay this and it will be exempt.

I could careless about being ineligible for FEMA..in my opinion... FEMA is a joke. They never helped us during the two icestorms we had in 2007, so we lost all hope in FEMA finanical aide.

I have delt with insolvency previously already, so when you OWN nothing and have equity in nothing, you pretty much don't have to worry about it. I was previously in a debt settlement company and had one loan forgiven that I claimed insolvent to.

My lawyer is far from an idiot, as he deals with this type of stuff on a daily basis.

Also, garnishment would be way better than the minimum payment they are wanting by 100.00....so..we will see what happens.

Sure garnishment might be the cheaper option, but since garnishment is not a voluntary repayment, you wouldnt have to worry about insolvency matters as you would not qualify for loan cancellation.

Does your OB GYN do brain surgery? Same for the legal profession. He speaks of something he is not thoughly trained or versed in.

Yes, it will probably be cancelled before the twenty five years. When Congress changes the laws on Student loans and allows more of them to be forgiven and bankrupted on again. There are laws being written to get congress to pass and this nightmare will all soon be over with.

WRITE YOUR CONGRESSMAN TODAY AND COMPLAIN!!!!

I really doubt the bk laws will change, the state guarantors and DOE will make damn sure of that. Taxpayers were having to suck up the costs of these BK's. Why should the taxpayers have to pay for YOUR education? They laws may be modified but the majority of people will not qualify, they will make sure of that.

The DOE has a loan cancellation policy in effect for those that follow the regs. It is more than generous.

No, the DOE does not have a loan cancellation in effect for those that follow the regulations, if that were the case, I would have started paying along time ago. The DOE has loan cancellations for TEACHERS who teach in low poverty communities. What about underpaid state workers that provide: food, shelter, daycare and medical to the low income families in the poverty communities? Without the assistance from the state workers these low income families would suffer and that would drastically decrease the amount of students in schools. Right now the DOE just looks at cancellation programs for teachers, more or less. Yes, I could quit my job and go and teach as I have the same degree, but who will serve the low income families, when we all up and leave to go and teach--just so we can have our student loans cancelled out or forgiven?

This is something that needs to change and needs to change quickly. Congress has the power to do it and DOE has the money to fund it.

Absolutely.

Many of these college graduates are coming from state liberal arts schools with liberal arts degrees and they mostly end up in social services offices, law enforcement and other low level government jobs; many of them making no more money than the population they serve. There absolutely needs to be some research and change in that area as you are right. They serve the taxpayers in the low level jobs they do. How can anybody say these student loan debts shouldn't be a concern of the taxpayer? We're spending billions in war and we can't afford to show our own some relief? Bull.

We need to push this upcoming adminstration and our local lawmakers on how their plans for this. I'm with you.

State workers as a general rule are paid much better than teachers teaching in poverty communities. Why should state workers get cancellations?? Did you go to school expecting loan cancellation? Did you go to school to become a teacher or a social worker? You say you like your job...,you cannot have your cake and eat it too. Next thing we will hear is the lady washing dishes at that low income school will want loan cancellation too because she works at a poverty stricken school!! Providing assitance to low income people is NOT teaching...their is a world of difference. I worked at a school that qualfied for loan cancellation....those teachers deserved every penny they earned and then some. They spent 6 plus hours a day with children who were crack babies, trying to control tantrums of kids who were ignored or abused by their parents. It was exhausting for them. They not only had to teach the problem kids but the normal kids so they were running two class levels at once. I saw the social workers coming in daily basis...leaving many would express that thank god they didnt have to deal with these kids on a daily basis as they ran to their cars. Our own school had 3 in house social workers and they had trouble coping with the behavioral problems, let alone trying to educate these children.

When I went to school back in the 70's and early 80's, paying for school was OUR responsiblity. Being from a single parent household, my mum couldnt afford to help. I had to pay for it thru scholarships, working and saving thru high school and college and what loans I could get. We had to take responisiblity for the costs of our education. What has changed? Today people EXPECT the government to pay for their education because they and their parents did not prepare themselves. Post secondsary education is not a right....it is a privelege. When I worked in fincial aid, I would see students and their families who would walk in 3 weeks before school started without a clue as to how to pay for it. THe student would not have any savings (I couldnt work a job before leaving for college....I had to hang out with my friends!), parents would be mortgaged to hilt and they bitched when they couldnt get Pell grants. This same student "had" to live in dorm although the family lived within a 20 minute bus ride. Again they borrowed to pay for the dorms so they could get the "college experience". Liberal arts colleges do not provide you with job skills...they provide you the ability to learn. You want a trade, go to a community college or training school. The general taxpayer should not be shouldered with the expense of paying any more for eduation than they already pay thru grants and subsidizing interest on stafford loans. When I worked collections, I would see these same students....they thought nothing of paying $350 per month on a newer model car loan of $18k, but at the same time default on their $12k student loan because they couldnt afford it. Priorities are all set wrong.

Law enforcement....why go to a liberal arts college. Most cops can do 2 year community college program. If they chose the 4 year plan, that is their problem. Plan better.

Lynn, you mention that state workers are on the general paid more than teachers. Did you take into consideration that they consider the Senator a State worker! They consider the University of Oklahoma's football coach as a "STATE WORKER", he makes 200,000.00 + a year. The "average" State worker in Oklahoma grosses probably 30,000.00, and that is a BIG maybe. State workers in my area are able to receive the assistance from their employer, that is taxpayers money anyway, so doesn't it make sense to have congress cancel out State employees student loans in low income serving fields of work?

And by the way, you don't need a college education to work in the cafeteria.....

You also mention that Teachers deserve every penny of their pay for dealing with crack babies 6+ hours a day, well State workers deal with them 8+ hours a day and 24/7! Teachers are thankful they ONLY have to deal with them their 6+ hours a day, Monday thru Friday.

Good, I have written a letter to Congress...Write yours today!!!

And social workers do not teach with them at all.

If you dont like your pay, relocate.

While I will agree that you should pay for your education, as a "state worker" or "social worker" I must say that the pay is nothing for the amount of work I do with very tough circumstances including "teaching" clients who have never been taught important if not basic life skills. These circumstances include going into neighborhoods and homes where your very health and life are at risk. You don't become a social worker for the money but because it's the right thing to do....to look, analyze, and help. I also think good teachers do an incredible amount of important work. I don't think it is very useful to compare and I think it's even worse to put down a profession.

"Behaviour problems" aren't going to be "handled" only by social social workers. The "social" part of "social worker" implies that problems are indeed social and best addressed by the very "social" entities that a person is connected with including family, teacher, therapist, friends, society. Working together solves a lot more problems.

Under the new laws, a "state worker" can have their loan forgiven after 10 years of public service.

Bench, I would like more information on the new laws you mention. I am 10 year veteran as of 1/16/08. I have to much invested in job and retirement and etc to relocate. I have alot invested, but still yet NOTHING to show for it but 47,000.00 in student loan debt.

Depressing.

I am sorry for hijacking this thread into bash the teachers thread. I just get so frustrated because it is all about teachers...and for what reason? ...Why are there kids in my son's 4th grade class that are at 2nd grade reading level???? If this so called teaching is what will get my loans cancelled, I need to move on to the teaching gravy train.

Ummm...yeah, go ahead and do that. Then come back and tell us about what a cakewalk teaching is.

Found the Public Service Loan Forgiveness Program...http://www.finaid.org/loans/publicservice.phtml



Public Service Loan Forgiveness
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The College Cost Reduction and Access Act of 2007 established a new public service loan forgiveness program. This program discharges any remaining debt after 10 years of full-time employment in public service. The borrower must have made 120 payments as part of the Direct Loan program in order to obtain this benefit. Only payments made on or after October 1, 2007 count toward the required 120 monthly payments. (Borrowers may consolidate into Direct Lending in order to qualify for this loan forgiveness program starting July 1, 2008.)
This contrasts with the loan forgiveness of the remaining balance after 25 years of repayment under the income-contingent and income-based repayment plans for borrowers who are not employed full time in public service jobs.

Eligibility

The public service loan forgiveness program has several restrictions:


Term: The forgiveness occurs after 120 monthly payments made on or after October 1, 2007 on an eligible Federal Direct Loan. Periods of deferment and forbearance are not counted toward the 120 payments. Payments made before October 1, 2007 do not count. Likewise, only payments on a Federal Direct Loan are counted.

What is forgiven? The remaining interest and principal are forgiven.

Employment: The borrower must be employed full-time in a public service job for each of the 120 monthly payments. Public service jobs include, among other positions, government, military service, public safety and law enforcement (police and fire), public health, public education, public early childhood education, public child care, social work in a public child or family service agency, public services for individuals with disabilities or the elderly, public interest legal services (including prosecutors, public defenders and legal advocacy in low-income communities), public librarians, school librarians and other school-based services, and employees of tax exempt 501©(3) organizations. Full-time faculty at tribal colleges and universities, as well as faculty teaching in high-need areas, also qualify.

Lots more information at the link.... but the bottom line is that you have to consolidate with Direct Loans under the ICR and pay for 10 years.

Thank you Lynn, I will check into it.

You have been very helpful with the information you have gave me. I will either agree or disagree..but I have to learn from my mistakes. EVEN IF THEY ARE HUGE $$$$$$ mistakes.

Lynn, Thank you so very much for sharing that information with me. I called them today and found out I can REconsolidate a third time with direct loans and be in the public service forgiveness program. My payment will be affordable to me and my income. Half of what they expect me to pay with ACS.

It is a dream come true. Then in 7/2009 they are placing into effect a even better payment plan that I will be eligible for that will reduce my payments by half again. Then in ten years the remaining will be forgiven. This will work for me and my family, no complaints here.

I am thankful that I found this board!!!!