All right here goes:

I just received a call AT WORK regarding my defaulted student loan. They want to enter me in the rehab program (no prob) but they are asking more than I can reasonably afford to pay and they started threatening wage garnishment. Now, I've been reading, and from what I gather, the US Dept of Ed does not have to sue to garnish wages.

Unfortunately, I think I admitted that the loan was mine (because I didn't want to get in a big argument with the CA at work where everyone could hear me), so can I still send validation? Validation is to prove that the CA has the right to collect the loan, correct?

I could really use some advice as to where to go from here. I have a standard/generic Validation letter, but I was wondering if it should be re-worded or re-worked for a CA for a student loan? Also, do all the rules of validation (can't pursue collection activities) apply? Can the CA garnish wages or would it be the Dept of Ed?

Help! Please!

Selfishly bumping ...

Please, someone tell me should I go ahead and still send the validation letter?

Personally, I would skip the CA altogether and just contact the US Dept of Ed and see if you qualify for a William D. Ford consolidation loan. They have an income contingent plan along with several other payment plans that will make your life much easier than dealing with any CA on earth.

I believe the Dept of Ed will take your IRS refund checks first before garnishment.

the consolidation loan won't help with the negative rating on his credit report.

I would play hardball with the CA, counter there offer with payments you can reasonablly afford. Don't give in to thier demands on payments you can't make.

at last resort to avoid garnishment then do the consolidation

I've already talked to the Dept of Ed. They told me that I'm stuck working with the CA. The ombusman told me the same thing.

I do wish to rehab the loan, however, I just can't afford the high payments that the CA is "asking" for. Also, can they threaten wage garnishment? Would the CA be able to garnish my wages or would such a thing have to go through the US Dept of Ed? And if I'm making good will payments would the US Dept of Ed even bother?

If the Ombudsman & Dept of Ed say you are stuck with this CA, that is a tough one.

You could ask the CA if you qualify for the 'income sensitive' repayment plan. (Pretend like you know what you are talking about). They will ask for documentation of your wages (w-2's, paystubs). This is rock bottom payments & you have to qualify based on income and this is only for a limited period of time.

The next tier would be 'interest only' repayment plan.

If you are making satisfactory payment arrangements with the CA (get it in writing) Dept of Ed will leave you alone. I know Dept of Ed has no problem snagging an IRS tax return.

I believe you still must be taken to court prior to any wage attachment. This is the link for how 'rehabilitated' loans (12 ontime monthly payments)after a default are to be reported to the credit bureaus:

Try this link for the full CFR (US Code of Federal Regulations) citation:
http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi

The section you are looking for is as follows: 34CFR682.405 c2 which is:

(2) The guaranty agency must report to all national credit bureaus
within 90 days of the date the loan was rehabilitated that the loan is
no longer in a default status and that the default is to be removed from
the borrower's credit history

They called me at least twice a day harrassing me over my DofE loans. Scumbag CA they were...

Im paying more than I can afford and my wife and I are struggling to put food on the table as it is....thankfully there are no kids in the family yet. Ive been in the rehab program since December so my last payment should be November...it's tough to get thru but we're already 6 payments in and we're seeing the light at the end of the tunnel.

They might lower your payments..but want a large down payment...dont fold on that, they dont need any down payment to start your rehab. And make sure you put that rehab agreement in a safe place.

Gawd I cant wait for this rehab to end.....but for a clean CR it's worth it.

snowpuppy

In general this is not good advice. To consolidate while in default simply locks all the negative student loan information onto their credit. The best option in almost every scenario is to do through rehabilitation before doing anything to consolidate.


fla-tan

I would always tell a former student with defaulted student loan issues to attempt a William D. Ford consolidation.

The chance to consolidate with an income sensitive or interest only payment for a time can be a Godsend to someone who is already drowning financially. The students I counsel who already have a loan(s) in default are because they were unable to make the original payments and have run out of deferment/forbearance options.

For someone who is at the end of their rope, a few late payments on a credit report that will eventually age and fall off is better than the IRS contacting you.

FWIW, I see you are in the mortgage industry. I am a financial aid officer.

Gail

They do. Not that I'd know from personal experience or anything.....

Gail

My motive is to assist people to put themselves in the best possible position that they can be put in. Rehabilitation regulations state that the payment must be reasonable based on the borrower's income. That is not overly different than the payment requirement for an income contingent consolidation with Direct Loans. Rehabilitation removes a major negative from the borrower's credit and makes it easier for them to obtain additional credit at reasonable terms. With a default on the credit a potential borrower is looking at 15-24% or higher for an auto loan for an example.

BTW, FYI, I have over 20 years in finance in general far beyond either the student loan industry or the mortgage industry. I look at the big picture and not just a small segment of it.


fla-tan

Here's the interesting thing:

All my payments still go to the US Dept of Ed. but it's the CA that's calling me. (The mailing address for payments is the same as the one the US Dept of Ed lists on its website for defaulted loans)

So, if I am making goodwill payments to the US Dept of Ed, even if it's not what the CA wants me to pay or is trying to make me pay, then will the US Dept of Ed stay away from wage garnishment until I can get the CA to give me a reasonable and workable and affordable repayment plan for rehabilitation?

bump bump