I take it settlement and not rehab is suggested in the case below? If these are settled today, when do they drop off completely from credit reports (see below how they're listed)
Also what is tax paid on, all unpaid principle+interest or is it collection costs as well?
If settled today, can anything happen to extend these being reported past the scheduled date of removal listed in today's report:
TransUnion
state loan more than 10 years old, listed in report as
Date Opened: 06/2002 Date Closed: 04/2004
Estimated date that this item will be removed: 05/2008
Same loan listed by Experian as
Status: Collection account/Current, was a charge off. $xx,xxx written off. $x,xxx past due as of Mar 2008.
Status Details: This account is scheduled to continue on record until Nov 2010.
USA FUNDS
more than 10 years old, listed in report as Date Opened: 07/2002 Date Closed: 09/2002
Estimated date that this item will be removed: 05/2008
Same loan listed by Experian as
Transferred,closed/Claim filed with government as of Jun 2002
Account transferred to another lender.
US DEPT OF EDUCATION
more than 10 years old, listed in report as
Date Opened: multiple loans > 10 years old Date Closed: 07/2002
Estimated date that this item will be removed: 04/2008
Lump sum payment (paid over 90 days ) is the only way to reduce the costs.
But interestingly, nothing but the usual full principle + half the interest would even be considered, regardless of length of default or any unusual circumstances (not counting death etc.).
But interestingly, nothing but the usual full principle + half the interest would even be considered, regardless of length of default or any unusual circumstances (not counting death etc.).
QUOTE(stormbringer @ Mar 26 2008, 04:54 PM) 
Lump sum payment (paid over 90 days ) is the only way to reduce the costs.
But interestingly, nothing but the usual full principle + half the interest would even be considered, regardless of length of default or any unusual circumstances (not counting death etc.).
But interestingly, nothing but the usual full principle + half the interest would even be considered, regardless of length of default or any unusual circumstances (not counting death etc.).
Most accounts will only settle off on the collection costs. Cutting into interest at least when I was collecting was much more rare.
Anything settled off on will be subject to a 1099.
Regarding 1099 confusion, the question is about if this includes collection costs. If it does the tax can be substantial, does IRS deal with people on this and make payment plans, if so at what interest rate? Is it prime?
What is the cap on collection costs, a percentage of prinicipal or principal + interest?
People with old accounts seem to be offered principal + 1/2 interest deal as part of standard procedure nowadays. This is reported often enough to suggest a pattern when it comes to older accounts (10 years +).
What is the cap on collection costs, a percentage of prinicipal or principal + interest?
People with old accounts seem to be offered principal + 1/2 interest deal as part of standard procedure nowadays. This is reported often enough to suggest a pattern when it comes to older accounts (10 years +).
QUOTE(stormbringer @ Mar 28 2008, 08:03 PM)
Regarding 1099 confusion, the question is about if this includes collection costs. If it does the tax can be substantial, does IRS deal with people on this and make payment plans, if so at what interest rate? Is it prime?
What is the cap on collection costs, a percentage of prinicipal or principal + interest?
People with old accounts seem to be offered principal + 1/2 interest deal as part of standard procedure nowadays. This is reported often enough to suggest a pattern when it comes to older accounts (10 years +).
What is the cap on collection costs, a percentage of prinicipal or principal + interest?
People with old accounts seem to be offered principal + 1/2 interest deal as part of standard procedure nowadays. This is reported often enough to suggest a pattern when it comes to older accounts (10 years +).
There is no cap on collection fees. They are usually between 18.5% and 25% depending on the guarantor. You would have to consult the IRS website or a tax professional on how collections are handled for tax debt.
I spoke with a friend of mine that works at Allied. They handle DOE and several FFLEP loans. He told me that none of the clients has standard procedure....each case is based on circumstances and income. He says they rarely are able to waive interest. Says of all settlements, waiving interest is at less than 1%.
Point taken. However, looking back to real life experiences as being reported here, if it is 1% or close to it overall, unusually high number of them posted here about it.
My conclusion was drawn based on the number of posts here and elsewhere mentioning principle + 1/2 interest being offered to people with +/- 10 year old or older accounts.
I do agree that anything less than 1/2 interest is extremely rare. How did that happen is the question. Did they just happen to come across a 'manager' who authorized it or did they push for a review and made the Collection Agency contact Dept. of Ed. to make a case for them? It seems that managers who did authorize less than 1/2 interest always mentioned the need to contact Dept. of Ed first. Whereas, the 1/2 interest deal did not always need additional authorization from Dept. of Ed.
My conclusion was drawn based on the number of posts here and elsewhere mentioning principle + 1/2 interest being offered to people with +/- 10 year old or older accounts.
I do agree that anything less than 1/2 interest is extremely rare. How did that happen is the question. Did they just happen to come across a 'manager' who authorized it or did they push for a review and made the Collection Agency contact Dept. of Ed. to make a case for them? It seems that managers who did authorize less than 1/2 interest always mentioned the need to contact Dept. of Ed first. Whereas, the 1/2 interest deal did not always need additional authorization from Dept. of Ed.
I think one of the reasons settling federal SLs for more than collection costs is rare might be because most people have garnishable wages. If you are garnishable, the money can be got from you over the long term. Also, if you are making and have been making payments, that is an argument against settling with you. That really turns the knife for people who have been struggling and maintaining payments--it's not fair--but it is part of the criteria a creditor will consider, of course. You have to be able to make a highly convincing argument that settling makes the most financial sense to the creditor. Emphasize whatever personal factors most strongly support that. Present and past history of low income, spotty employment history, present responsibilities, family calamities, health, impending disabilities, poor employment prospects, foreclosures, likelihood of not being able to make future payments, etc. Most likely, if you are putting together the resources and personal energy to deal with loans and are researching how to do that to your advantage, you are feeling optimistic and empowered; but ironically, if that is apparent, it may count against you!
Here's some info on settling, from a previous post of mine. I settled 10 Staffords and researched it thoroughly first. The compromise formulas are from the DOE's own guidelines to CAs:
If you haven't been making payments and the CA believes that they are not likely to get you to enter into payments, AND your wages cannot be easily garnished (for instance, you are self-employed), then according to Dept of Ed guidelines the CA may offer to compromise. They are directed to get a financial statement before heading into settlement offers, but that was an informal phone discussion in my case. Without DOE preapproval, the CA supervisor can offer to: drop collection charges; drop collection charges and 50% of interest; or drop collection charges, 10% of interest and 10% of principal. I went with the last one, a 35k settlement on a 50k total (including interest and collection fees). (My original loans amounted to about 35k principal 12 years ago.)
I'd add that the CA will probably tell you they need DOE preapproval to offer the above compromises, but they do not, at least from the DOE's own guidelines to CAs. The supervisor at the CA has the authority. It's helpful to know that when you are negotiating.
I believe that more of a discount--a discretionary settlement--requires DOE preapproval, as I understand it, and so the reasons have to be especially convincing. Meaning, I guess, that when they consider your history and present finances and resources it's not likely you will pony up payments, so a settlement makes more financial sense to them. The CA actually offered to drop my settlement offer another 3k, but I knew this might involve more documentation of my circumstances, so I opted for a bird in the hand.
I was greatly helped by the book Student Loan Law, particularly the small print. It's a law text but accessible. It was recommended to me by a lawyer who said few law offices will take on student loan settlement cases. The book cost, I think, around $100 if I recall (this was 1 1/2 years ago). I ordered it online (google the title). It was worth it.
I was really desperate to get out from under my loans. Psychologically I needed them gone. But rehab is not a bad idea, particularly if you can't settle to your satisfaction. The rates are lower on federal student loans than most loans, and IF you are able to avoid a second default, you have flexible repayment options and some protections not afforded by other forms of borrowing. I'm betting student loan reform is coming up in the next presidential administration, and rates may drop further.
Here's some info on settling, from a previous post of mine. I settled 10 Staffords and researched it thoroughly first. The compromise formulas are from the DOE's own guidelines to CAs:
If you haven't been making payments and the CA believes that they are not likely to get you to enter into payments, AND your wages cannot be easily garnished (for instance, you are self-employed), then according to Dept of Ed guidelines the CA may offer to compromise. They are directed to get a financial statement before heading into settlement offers, but that was an informal phone discussion in my case. Without DOE preapproval, the CA supervisor can offer to: drop collection charges; drop collection charges and 50% of interest; or drop collection charges, 10% of interest and 10% of principal. I went with the last one, a 35k settlement on a 50k total (including interest and collection fees). (My original loans amounted to about 35k principal 12 years ago.)
I'd add that the CA will probably tell you they need DOE preapproval to offer the above compromises, but they do not, at least from the DOE's own guidelines to CAs. The supervisor at the CA has the authority. It's helpful to know that when you are negotiating.
I believe that more of a discount--a discretionary settlement--requires DOE preapproval, as I understand it, and so the reasons have to be especially convincing. Meaning, I guess, that when they consider your history and present finances and resources it's not likely you will pony up payments, so a settlement makes more financial sense to them. The CA actually offered to drop my settlement offer another 3k, but I knew this might involve more documentation of my circumstances, so I opted for a bird in the hand.
I was greatly helped by the book Student Loan Law, particularly the small print. It's a law text but accessible. It was recommended to me by a lawyer who said few law offices will take on student loan settlement cases. The book cost, I think, around $100 if I recall (this was 1 1/2 years ago). I ordered it online (google the title). It was worth it.
I was really desperate to get out from under my loans. Psychologically I needed them gone. But rehab is not a bad idea, particularly if you can't settle to your satisfaction. The rates are lower on federal student loans than most loans, and IF you are able to avoid a second default, you have flexible repayment options and some protections not afforded by other forms of borrowing. I'm betting student loan reform is coming up in the next presidential administration, and rates may drop further.
Thank you for an informative post. How do you speculate next year's reform might affect defaulted loans?
On the matters you mentioned, what if you do you research and are able to present your case as being unusual, and have the documentation that could potentially take their offer lower, but you come across a manger who refuses to accept any documentation, saying they'll "never, ever, ever do less than principal + 1/2 interest."
We know they could go lower in rare cases with verifiable documentation, but Dept of Ed. won't discuss this, so you're at the mercy of the collection agency, is there anyone above the so called manager?
On the matters you mentioned, what if you do you research and are able to present your case as being unusual, and have the documentation that could potentially take their offer lower, but you come across a manger who refuses to accept any documentation, saying they'll "never, ever, ever do less than principal + 1/2 interest."
We know they could go lower in rare cases with verifiable documentation, but Dept of Ed. won't discuss this, so you're at the mercy of the collection agency, is there anyone above the so called manager?
I'm an optimist about reform. It's just my opinion, but I would hope the rates would drop for consolidations subsequent to rehab on defaulted loans. But I doubt any rate changes would affect loans currently in default.
It sounds like you actually have been offered settlement at principal plus 50% interest? If so, that's a bird in the hand and not bad at all IMO, if it's at all possible to put together the money! If you try to drop below that amount you might in the process inadventantly document assets or garnishable income or other potential income or personal loan sources that would cause the CA and/or DOE to decide they can hold out for the full amount.
It's my understanding that the CAs really do have the say-so on whether or not to offer any settlement at all. And which formula to offer is based on the DOE's guidelines to CAs, but as we all know from unpleasant experience, there is far too little oversight of CAs collecting from student loan borrowers. Once a CA has your loan, you really do feel like you've been thrown to the wolves.
So, although rehabbing a defaulted loan is a borrower's right, I believe there is no legal right to request and receive a settlement offer, or to drop the amount into discretionary territory (below principal plus 50% interest). You can ask to speak to a supervisor at the CA, but it sounds like you've already done that. By contract, even though the DOE still owns the account, the DOE can't negotiate with you while your account is assigned to the CA.
The DOE has been known to pull back loans from the CAs if the CAs have been engaging in flagrantly illegal practices. One guerrilla tactic that I read somewhere--maybe on CB!--is to try to reach someone sympathetic at the DOE, changing the last digit in the phone number until you reach someone sympathetic to your cause who can follow through on pulling back the loan. Also, the DOE very definitely responds to inquiries made on your behalf from VIPs like your Senators and Representatives. The DOE directs the CA to cease collection efforts immediately. Then DOE reviews the account and may even recall it from the CA, if I remember correctly what I read in Student Loan Law. So if you really have an extreme situation, you might get somewhere with that approach, but as I said, it might backfire on you. If you've managed to get an offer of principal plus 50% interest, that might be your best bet.
Also, if your FICO is important to you, make sure you know the dates for any events that might have reaged the reporting period on your loans. Do you know how long the DOE has had them? FFEL loans report for an additional seven years from that date. Can't quite tell from your first post. You'll lose the chance to rehab (and clear your credit) if you settle. Check your loan dates on the NSLDS if you haven't already (www.nslds.ed.gov).
Let us know how you're doing with this! Good luck!
It sounds like you actually have been offered settlement at principal plus 50% interest? If so, that's a bird in the hand and not bad at all IMO, if it's at all possible to put together the money! If you try to drop below that amount you might in the process inadventantly document assets or garnishable income or other potential income or personal loan sources that would cause the CA and/or DOE to decide they can hold out for the full amount.
It's my understanding that the CAs really do have the say-so on whether or not to offer any settlement at all. And which formula to offer is based on the DOE's guidelines to CAs, but as we all know from unpleasant experience, there is far too little oversight of CAs collecting from student loan borrowers. Once a CA has your loan, you really do feel like you've been thrown to the wolves.
So, although rehabbing a defaulted loan is a borrower's right, I believe there is no legal right to request and receive a settlement offer, or to drop the amount into discretionary territory (below principal plus 50% interest). You can ask to speak to a supervisor at the CA, but it sounds like you've already done that. By contract, even though the DOE still owns the account, the DOE can't negotiate with you while your account is assigned to the CA.
The DOE has been known to pull back loans from the CAs if the CAs have been engaging in flagrantly illegal practices. One guerrilla tactic that I read somewhere--maybe on CB!--is to try to reach someone sympathetic at the DOE, changing the last digit in the phone number until you reach someone sympathetic to your cause who can follow through on pulling back the loan. Also, the DOE very definitely responds to inquiries made on your behalf from VIPs like your Senators and Representatives. The DOE directs the CA to cease collection efforts immediately. Then DOE reviews the account and may even recall it from the CA, if I remember correctly what I read in Student Loan Law. So if you really have an extreme situation, you might get somewhere with that approach, but as I said, it might backfire on you. If you've managed to get an offer of principal plus 50% interest, that might be your best bet.
Also, if your FICO is important to you, make sure you know the dates for any events that might have reaged the reporting period on your loans. Do you know how long the DOE has had them? FFEL loans report for an additional seven years from that date. Can't quite tell from your first post. You'll lose the chance to rehab (and clear your credit) if you settle. Check your loan dates on the NSLDS if you haven't already (www.nslds.ed.gov).
Let us know how you're doing with this! Good luck!
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