I've been holding my head under the sand for too long - a call from Pioneer Credit Recovery snapped me out of it.

According to NSLDS I have three defaulted loans (after an earlier non defaulted consolidation)

Direct Consolidated Unsub: principal 8311 +interest 382 = 8693
Direct Consolidated Sub : principal 27275 +interest 1257 = 28532
Direct Stafford Sub : principal 2003 +interest 196 = 2199

total with interest = 39424

All three were listed as defaulted as of 03/03/09.

I spoke with the CA and was confused by the situation - the guy changed his story, threw numbers super fast and had me at a loss - I got off the phone and have been avoiding their calls while I educate myself. The fax I asked for was for a full settlement (as my prom notes state) and listed the amounts owed as 11052 36273 and 2808 respectively from above (50134 total). this works out to be a 10710$ in fees = a 27.16% collection fee right?

I am going to call the CA to setup an agreement to get my SL rehabbed - and I understand that I need to use the phrase "I want to rehabilitate my loans". I further understand the HEA does not require a down payment so I will inform the CA of that as well if they insist. My plan for now is to agree to a rehabilitation payment of 1% of my balance, follow through the 9 months and then consolidate when my loans are back with DOE and extend the terms to lower the payment - then pay it off above and beyond as my income increases in time.

With the economy the way it is in California (where I live) my job security is shaky and if I am laid off I want to have as much time as possible to try and find a new one, so I want low payments during rehab with no down payment. I was initially holding off till I could PIF (still way off), but that seems to be the wrong approach.

Questions:
1. I thought the DOE was the one tacking on the collection fee and it was limited to 25% - is this true? if so what recourse do i have with the CA? should I get the ombudsman's assistance now?
2. This makes the above question moot (or not as important): since my loans are with the DOE, upon receipt of my 9 rehab payments, will the collection fees of 10710$ be waived? Are the rehab payments first hitting these fees or my outstanding interest (what is the order of application of funds)?
3. I've seen the 1% of balance as the minimum rehab payment thrown around a lot when reading these forums, but I couldn't find if that is calculated based on the balance+interest or balance+interest+fees - which is it? (in my case it makes a big difference)

I think I have enough information to not be bullied by the CA and to sound somewhat educated now - and I really do want to finally address my delinquency and begin this long hard road to become debt-free.

Do i need to call the DOE to get the name and number of Pioneer's liaison or is that jumping the gun?

I really hate what I've gotten myself into but I'm starting to feel better about myself for making a plan and I'll pluck up the courage to call the CA again soon.

One more thing - I was thinking that to really ensure that after a rehab agreement is reached, I would then request to tape the phone call so I can definitely get back to the DOE and really rehab when finished with payments to the CA. since I'm in a two party state I would have to ask - but I don't want the call to get off on the wrong foot if I ask them immediately - is this a good idea or not?

Thanks so much to LynninMN and ziggy and others for your great advice I hope you can help me out here too.

Mike

Thank you for clarifying Lynn - just what I needed!

Well, called the CA (Pioneer), briefly spoke with the representative who has been leaving me messages. I confirmed that I was not able to settle in full, so she pushed on about a 1/3 payment. I told her I never agreed to that but that I did have a payment I was willing to make to the DOE in order to get my loans rehabilitated.

I offered 505$/month on my total balance of 50100$ with no down payment.

I was quickly transfered to her section rep - who flat out told me that without a down payment I could make payments but that they would not be towards a rehab program. I told this rep that I knew that in the HEA there is nothing that mandates a down payment and that my offer is 1% of my total balance. She insisted that they would contacting the department of justice to start proceedings to AWG and I told them to please not threaten me. She stated that she was not and that these are their procedures, I told her I understood, that I was attempting to enter into a voluntary payment agreement and that I would contact the DOE to see what they said.

I called the DOE to get the name of the CAs dispute liaison that 'Jaymes' mentioned recently - the DOE rep had no number of such a person, was somewhat friendly but not ultimately helpful.

What to do now?

Call DOE again and try for a more knowledgeable rep?
Call ombudsman and explain my situation?

I have not received anything from the CA regarding AWG in the mail so I'm not yet worried about their scare tactics.

I have again searched through these amazing forums and found the following notes:

Lynn mentioned "to qualify for rehab", "that the CA was bound by federal law to accept reasonable and affordable payment", and that there is "nothing the HEA that requires a downpayment" in several posts - Lynn is there someplace in the HEA that states the rehab qualification requirements? - I'm going to start digesting the HEA tomorrow but if you have the relevant portion handy I would appreciate it.

Do i need to file a complaint with the DOE if the CA won't accept my offer w/o a downpayment? Is this the ombudsman for the DOE?

Also Jaymes earlier this month suggested that a poster should tell the CA that "you are going to contact the student loans ombudsman and tell them they (the CA) are not following the rules of the HEA"

What is my next step CreditBoarders?

The CA throwing around "Department of Justice" and that they would be contacting them is a big no no. CA's have no involvement in deciding, contacting or forwarding of accounts.

I am on a slow computer here at home so I cannot pull up the HEA. Once I get to my workshop, I will pull it up. The wording (off the top of my head) is something to the effect that the payments have to (1)equal what it would take to pay off the loan in 10 years or (2)reasonable and affordable...reasonable based on the balance and affordable to the borrower.

Lynn,

Thank you so much for your help so far -- if you have any time today before this evening - 8pm ET would you please let me know if you find what you were looking for in the HEA? (wording describing reasonable and affordable payments w/o a down payment)

I just got a call from Pioneer - at work - from a senior manager at Pioneer who told me he got a call from the DOE regarding how poorly yesterday went, he wanted to see what we could come up with later. So i'm going to call him around 8pm and see what he has to say.

Things may be looking up!

I looked for the quotes today....seems I remember that they were in a funny location but I cannot find them. So I called a former coworker who works at Allied on the DOE contract. He confirmed that the 1% payment is still the guideline in his manual, based on a 10 year repayment in rehab, with the 9 rehab payments being the first 9 of 120. He also suggested getting names every step of the way..."senior" manager to him and his knowledge of Pioneer is a made up title. He has been working the DOE contract for almost 15 years and gets to go to a lot of training and conferences where he meets different agency collectors and management.

Thank you Lynn -- I'll let you know how it goes later tonight

Well not so good:

I confirmed that I spoke with Mike Pitillo who described himself as a "Senior Manager with the DOE account" and that he was "above Veronica" (who identified herself as 'section manager' yesterday)

First he asked me if I could afford a settlement of 36291$ and I said no. (As I understand it a settlement is worse for your CR than following through with rehab and a plan -- AND I can't afford it). He asked how long I've been at my current employer (6 months) and if I had any IRA or 401k from previous (no).

Mike was very courteous and explained how rehab worked. It was all as I understood it from reading on these forums.

Then he calmly explained that there were four options for rehab on my balance of 50217$:

1. Down payment of 1/3 of balance 16710$ followed by 8 payments of 351$ = 19518$

2. Down payment of 10% of my balance 5012$ followed by 8 payments of 495$ = 8972$

3. Down payment of 5% of my balance 1250$ followed by 8 payments of 710$ = 6930$

4. 9 payments of 2169$ with no down payment = 19521$


I calmly explained to him that I was attempting to enter into a rehabilitation program and that by the HEA I was qualified to make reasonable and affordable payments based on my total balance. I again offered 1% of my total balance as a monthly payment and he refused (and also started to be less courteous). I told him I would be contacting the ombudsman to get this resolved and he said he would continue to process my account.

so... I'll start reading the HEA tonight and contact the ombudsman tomorrow.

Am I doing the right things here? I don't want to 'play with fire' by infuriating the CA if I don't have a leg to stand on - can they ever retract all offers of rehab programs for me? some of them?

Yup...time for the ombudsman. They have basically refused your offer.

So i was reading the HEOA of 2008 yesterday and it seems like all it does is amend the HEA of 1965 - same thing for the Higher education act posted in the sticky on this forum. Is that right? Is there a document that consists of the HEA of 1965 with all of the later amendments appended?

I'm a little worried about pushing too hard with the CA:
Am I doing the right things here? I don't want to 'play with fire' by infuriating the CA if I don't have a leg to stand on - can they ever retract all offers of rehab programs for me? some of them?

writing the ombudsman tonight - is there really a DOE-CA liaison for each CA like Jaymes spoke of recently? I wonder if "Senior Manager" is really a title or just another rep.


One more thing if I understand this correctly:
since payments are first deducted from fees, then interest, then capitol and since my remaining fees will be waived after 9 on time payments, I have nothing to gain by paying anything more than my 1% balance each month, unless that 9 month total is greater than my total fees (thus hitting some interest/capitol) right?

Thanks for your help so far Lynn - you surprised me when you mentioned you used to work for U of M - I went to U of M too (Michigan though!)

Any others want to chime in too?

As far as the liaison, I was told that by the DOE. When I called in with a complaint against a CA (the DOE later pulled the account from them and I'm working my rehab directly with DOE) the rep told me that I must deal with the liaison first in an attempt to resolve the dispute, and he gave me her direct dial number. He told me that if I was unable to find resolution with the liaison, I could call them back and they would try to work with me... but you have to tell them first that you attempted resolution before the DOE will go any further with you.

FWIU, it can take some time to get through to the umbudsman, so I'd start that process as quickly as possible, or call the DOE with a complaint against the CA and see if you can at least get the number for the liaison. That may be more expeditious than the ombudsman route, but Lynn definitely knows more than I on SL matters. I can only speak as to my experience, which was positive once I was able to work directly with the DOE.

Best of luck to you.