Hello everybody. I am your not un-typical young Father of two beautiful children. I am 25 years old and a College Graduate. I let my loans become "out of sight, out of mind" foolishly and now am paying the price. I did not do this out of irresponsibility, as a matter of fact I pay all of my bills on time, and do the absolute best that I can to support my fiancee and my two children. I live and work for them, and their well-being. I am not, however, seeking some sort of prize.. Just advice, please.

I recently got a call from the dreaded (as I have read in the last few hours) Collections Agency: Diversified Collection Service (DCS) I was informed that my total loan ($18,107) was delinquent and that they were trying to offer me a rehabilitation program.

To my dismay, I found out that I can kiss my federal tax return goodbye. I did not know this. I am devastated at the loss (It was $5500) because this money needed to go toward a surgery on my shoulder, and to buy clothes for my kids. Is is absolutely true that they are going to take my full federal return? I fear that the answer is "Yes", but wanted to ask those that know better than I do.

Here is where I need some help/advice: They only gave me a TWO DAY window to come up with a down-payment to enter into a "Voluntary Payment Program" that will evidentally alleviate them taking away my return next year, as well as put me on the track toward paying this debt, and to better credit.

She told me that the MINIMUM down payment needs to be 10% (Or $1800ish dollars) and that I would then enter into payments of $168/month. This all seems awfully high to me given the fact that she said they would go as far as 15 years/180 months for payment.

I told her that I have NO WAY of getting $1800 dollars. I live paycheck to paycheck. How could I possibly do that?! Her response was to: "Seek outside assistance or private funding".. Yeah, sure. My credit isn't god awful, but it isn't sparkling either. I can't get a loan, so this point is moot. She did go on to say that her company would be lenient on the amount of the down-payment, but in order to enter any kind of voluntary payment program and avoid a 15% wage garnishment, I would have to come up with a down payment.

I guess what I am PLEADING for is advice. Please help me.

What can I do?
What are they not telling me?
How lenient will they be?
Is there anything I can do to benefit me?
Is there anyway to get this transferred to a different CA?
Is there anyway to remove some of their exorbitant collection fees?

I know that this is an arm-bar like process, but they pray on people not knowing any better. There has to be something I can do. I could maybe come up with a few hundred dollars as a down payment, but a monthly of anything over $100 is going to kill me.

Also:

Given that they are taking my $5500 return - Shouldn't I wait for the $5500 to be applied to the principle and lower my total due down into the 12,000 range? If it starts at $12K isn't it more advantageous for me to wait, and then enter into a voluntary payment plan so that my monthly payments are as low as possible?

I know this was a lot. I am scared, and confused.

GOD BLESS ANY OF YOU THAT WILL TAKE THE TIME TO HELP OR GUIDE ME. I REALLY MEAN IT: BLESS YOU! PLEASE HELP.

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^

I'm really one of those guys that doesn't know much, but lemme try and be a first responder until more knowledgeable people come along...

They cannot take your full federal (and state) return unless they manage to get a judgement in court allowing them to garnish. So, until they do (and if they do try it anytime soon, you should be given an opportunity to fight it out in the trial I believe), the answer is no.

As of the "down payment offer," wait for more knowledgeable people to give their advice, but in the meantime, as a general advice, start a paper trail. Anything they say, get it recorded and ideally, get everything you can IN WRITING. It helps a lot if things do go sour.

Hang tight!

Are these federal backed student loans? I think DCS is a collector for the Department of Education, so yeah, they can take your tax return. You have time to decide what you want to do before next year gets here...how about increasing your deductions so you get more in your paycheck? Get a $0 return or close to it.

OP, yes, they can seize your refund, and probably will. Also, the DO NOT need a garnishment to do so. I would also post in the student loan forum, as that is where the pros live. Student loans are very different from consumer debt. The lender-CA is in a much stronger postion than those holding other types of debt.

^^ Hmmm. Okay I'm not so sure that is correct info. If these are federal student loans then I am thinking that they can take your federal tax returns if the loans are in default. This can and has happened to others- I know people personally that this has happened to. The loans can be rehabbed and you can get an affordable monthly payment. I know people who have done this. I can't give you specific advice about how to do it though because I haven't had this experience personally.

Overall I'd say - don't panic. This can be worked out. You need to move this question to the student loan forum so that people who are more knowledgeable can help.

Thank you all very much. I was unaware that there was a specific forum for student loan questions. Thanks for letting me know. I appreciate it very much.

You can call 1-800-304-3107 to see if your refund from this year is actually set to be offset. Remember, they are STILL a collection agency and will say things to frighten you into compliance. And here is some additional informaton about a program to get your refund back if you can establish that it would cause extreme financial hardship for you and your family http://www.ombudsman.ed.gov/garnishment.html

As far as avoiding the collection costs, yes...it is possible. What I did when I was in your same situation was contacted a company that consolidated all of my student loans. That pulled the loans from the company that was trying to enter me into a rehab program and therefore pulling it from the outrageous collection costs. But you would have to act quickly on that...

As far as that crazy amount they are asking for to set you up with the rehab program, I have never heard of that...when I entered my rehab program, they took out 10% of the balance from my debit card on a monthly basis, no down payment required...

You have to stay on top of your student loans...they are cracking down so hard on people nowadays...

Moving to student loan forum.

You will not get your 2007 taxes back....it is already has a lien and it is too late to save it.

If DCS is collecting for the department of ed, you can save yourself on the rehabbing., However if your loans are held by a FFELP agency, the collection costs wont be waived.


To qualify for rehab, all you have to do is make 1% payments for 9 months. They can demand a down payment but it is in no way required under the Higher Education Act which governs rehab. You are entiled to reasonable and affordable payments by law to qualfiy for rehab....if they dont allow you to make these pays, then got to the ombudsman.

Hi;

Calm down - breathe deep. You WILL get through this.

First of all: You can most likely kiss your tax refund goodbye. They can, and will, take it, without an order from a judge. However, you should have gotten a warning letter stating that this was going to happen and giving you an opportunity to start repaying your loan.

Secondly: They CANNOT "require" a downpayment in order to enter you into the rehab program. $168 sounds about right for an $18,000 balance but you can appeal to the DOE for a more affordable payment if you need it. They wanted $300/month from me for my $21,000 loan and I successfully appealed for $200 monthly payments.

Your best bet is to start rehab, make your 9 payments, and have your loan repurchased by another lender, clearing your credit report and getting this debt off your back. I know the sick feeling that comes when you realize that you're not getting money you desperately needed and was counting on (They got $2600 from me last year, but this year, thanks to reahab, it's all mine again!) but this is when you need to take a deep breath, realized that YOU were the one who was irresponsible, and resolve to take care of this the best you can.

As far as your tax return - have you already filed? If not, can your fiancee claim the children and get the EIC and Child Care credits? If you were married, she could claim injured spouse and recover her part of the refund, if she works.

More people will be along with advice soon - this is a great forum - and we've all been where you are now.

I found everybodies responses very insightful, and helpful - An enormous thank you to you all.

Lynn - If you check this again (which I really hope you do) -- Where did you find the information regarding the Higher Education Act governing "rehabbing", and the result being that I am only required to pay 1% for 9 months?

I would absolutely love more information on this. Is it possible that you could provide me with any links to research this?

I want to inform myself as much as possible prior to calling DCA back to get this squared away.

Wow, you guys are all so great! Thanks sooooo much.

Is your fiance the mother of these 2 children?

Did you file electronically? If so and you have fallen into the section that it won't be submitted until Feb. 11th because of various credits, stop your return immediately. Amend it and have your fiance (assuming she is the mother and she worked in 2007) claim the kids.

How do I go about doing so? I wasnt aware that I could simply stop the filing process. I used HR Block's free file system and filed both federal and state electronically.