My student loans have been in default for over 2 years now. Few questions:

A) They sent a letter stating my tax refund check would be taken next time I file. If I establish rehab/good standings, will they still take my refund check?

I have a total balance of approx 22K. I noticed when it went to 3rd party collections, they added like approx. 4-5K in fees!! Is this negotiable or can I eliminate this somehow when I get back in good standings?

C) What can I expect my monthly payments to be with a 22K balance?

D) Finally, what steps should I take to establish rehab and good standings?

This is a nightmare, facing Ch. 7 for other debts as well. Thanks for all your help,
Jason

When the Debt Collection Services (DCS) at the US Dept of Ed takes your federal income tax refund, it is known as 'offset'. Even if you let them take every return until you are paid in full, the negative remarks on your credit report will remain so rehab is a better optiion. If you usually get a large tax refund, you may want to adjust your withholding with your employer so they take less out of your paycheck and you have a bit more to live on.

If you enter rehab, they may take any tax refund you have coming. Check the link to NSLDS to see where all your defaulted student loans are before you make your first call about rehab. A private collection agency will only know about the loans that have been placed with them and no other info. If all your loans are with DCS, then prepare to talk with them about a payment plan. At $22k your payments may be in the $300/mo range. You can negotiate the monthly amount, but they may ask for income verification such as paystubs.

Those who have been thru rehab may be able to shed light on how the fees & penalties were removed.

Thanks snowpuppy for your help. I am waiting for my PIN at the NSLD website. Hope all the loans are with the DCS. If some of the loans went to a private collection agency, could I get rid of them through a Chapter 7?

So you think it's possible to retract some of the fees and penalties? I was in shock when the balance went from like 17K to 22k! I understand interest accumulating, but that was insane. When they put me back on a payment plan will my interest rate be crazy, like 15-25%? How bad of shape am I in, realistically?

Sorry for all the questions, thanks again.
Jason

Should only take 48 to 72 hours to get your PIN by email.

It is extremely difficult to file BK on federally backed student loans no matter who the ca is. DCS tends to be professional. They deal with this every day & you usually get straight talk from them.

After you complete rehab, you may want to look at consolidation. It may lower the rates on your loans as well as extend the time period you can pay on them. Maybe someone can chime in with their experience in getting fees & penalties removed.

I think almost all of my fees/penalties were taken off when I was finished (probably about 10% of the total amount owed was removed). My interest rate wasn't jacked up during that time, either -- it was the standard 4.2% (or something right around there, anyway) -- and, while I had gotten the offset notification from the IRS in August or so (immediately before I started rehab), they didn't end up doing it since I had been in rehab for a few months by the following April.

My biggest piece of advice is to GET IT IN WRITING!!!!! It's not mandatory, but I'm getting the royal runaround about whether or not I was actually in rehab for the THIRTEEN months that I had made my payments to the CA, and, since I didn't have anything in writing, I have no proof. You shouldn't have a problem, but I'd get that just to be sure.

I'd second snowpuppy's recommendation to look into consolidation after you're done with rehab. It cut my payments by quite a bit by extending the time for repayment.

I hope this helps!! Good luck!!! Rehab really is a great program and I'm sure it will work out fine for you, although I know it's really stressful right now.

Rehabilitation is written into the Higher Education Act Section 674.39

You qualify for rehab after the 12th payment has been made. However it may take time for a lender to complete the purchase, hence 13 or 14 payments may be required. You must remain current to qualify. You do not need a written agreement...it is written into law.

For people with high balances, I recommend that you rehab first (if you can afford the payments)to take care of the credit report dings. Then consolidate. Generally the consolidation payments are much more affordable.

So what exactly is Rehab? I need to make 13 payments before going into rehab, is that correct?

Regarding consolidation, will I be making many small payments for these various loans before I consolidate?

Thank's everyone for their responses,
Jason

No, the payment are what makes up rehab. It's only 12 payments, really, but a lot of times you may have to make a 13th before the consolidation paperwork goes through. You're done with the rehab after 12 payments, though. They may also try to convince you to make a "down payment" before you go into rehab, but there's nothing requiring that in the law. Assuming all of your loans are with one lender/CA, you'll only make one payment to go toward all of them (after 3 years of law school and two types of loans each semester, I had 12 loans on my reports, but only made 1 payment). I think the way I've understood it, rehab is a 12-month program where you basically prove yourself once again to the Department of Ed. and then they forgive you for your sin of defaulting and, for credit reporting purposes and DOE purposes, it's like the default never happened.

Remember, though, you can only do rehab ONCE, so if you default again, you're SOL. Also, if you miss any payments while in rehab, you have to start over from the beginning -- so if you've made 10 payments on time and then are late for #11, you have to start over again from 1 in order to complete rehab (it's 12 consecutive, voluntary reasonable payments). Once you find out where all of your loans are, call whoever is holding them and ask them about rehab. You may have to negotiate a reasonable payment with them, but, in my experience, that wasn't too bad of a process. It also sounds like you're contacting them about the loans, rather than vice-versa, which they like.

Good luck!!

If you have received a letter stating that they are going to take your tax refund check, it's too late to save this year's check. They make those determinations in October every year. But if you enter rehab and consistently make payments, they shouldn't take NEXT year's refund. But lemme warn you ... if they are already after your refund check, garnishment is half a step away. Call TODAY and work out rehab arrangements, if it's not too late.

For information on garnishment, search for my screen name here and see what you come up with. Even if garnishment starts, it's not too late to appeal and try to get them to let you go into rehab (that is, rehab WITHOUT the added burden of garnishment).

Good luck.

Thanks everyone. I accessed the NSLD database and all loans appear to be there. My balance is $17,168. After fees, I remember it being like $22K. Can you believe it? So call DCS to sign up for a payment schedule and rehab? I'm assuming their ph # is in the important links section.....
Thanks,
Jason

NSLDS should show who the 'holder' is of each loan. If it is DCS, here is their website for further reading:http://www.ed.gov/offices/OSFAP/DCS/index.html

You might want to do an NSLDS printout so you can discuss each loan with them when you call.