I was talking with a very good friend of mine last who used to work collections with me here in Minnesota. In the past 6 years she has worked for 2 guarantee agencies in two states in default aversion. She used to have sympathy for students who default. Now that she has worked both sides of the system, she truly believes that 99.9% of all defaults could be prevented if students just paid attention to what they are signing and their responsiblities. Most people do not understand what these agencies actually do to prevent default, the man hours that are putting in calling and generating letters and skipping people down.

Lets go back back to the beginning
1..Student gets loan application and signs it. They attest that they have read and understand the loan disclosure on the back. Right?? I used to have students sign this paperwork in my office when I was a financial officer....they would never even glance at the reverse side discloser.
2..Students copy of the loan app and disclosure gets filed....dorm room shelf, a box....the trash. Parties on student loan money.
3. 4 years later tudent leaves of finishes school. Move home. (Parents bought new home 2 years previous)Tours europe.
4. Loan servicer gets mail return. Student moved.(Student was using school address) No forwarding left. Servicer sends mail to parents address...mail returned, cause parents moved 2 years ago. Call Auntie Suz and leave message. Auntie Suz thinks it is a telemarking call and throws out message.
5. Servicer notifies guarantee agency of pending default. Student loan now 90 days past due. Default aversion unit of guarentey agencey pulls credit report. Finds new address. Sends mail. Gets a new forwarding address and phone is unlisted. Sends more mail. It is now 150 days and 4 letters have gone to new address. Technically the servicer could have defaulted the student at the 1st mail return as a skip but they dont. At 180 days the loan the servicer is notified that deault cannot be averted. Guarentey agency pays claim.
6. Guarentey agency starts due diligence cycle back a day one. Letters go out at placement, 15, 30, 45, 60, 120 and 180 days. Calls are attempted in each "bucket". Next door neighbors, possible employers. Same last names. Nothing.
7. At 181 days, loan is sent to collections...more letters go out. Loan is submitted to the IRS and state tax board for offset.
8. Taxes seized. Letter sent by the IRS and state that they have seized taxes to the taxpayers address of filing. Contact information included.
9. Student calls collection agency. "You took my taxes"..."I was planning on buying a car!!" Student then says.."I didnt know how to reach you". There address is verified but student says. "Oh yeah, I got those, but I didnt open them...they are here somewhere." 18 months worth of letters. In those letters were options to defer, forebear, or prevent default. Never read. "But I wasnt working". READ THE LETTERS!!

This is very typical. I saw it over and over again. My friend Michele saw it over and over again. The biggest problem is that students do not keep lenders servicers up to date with correct addresses and phone numbers. This is the number 1 reason for default. It costs the lenders/servicers money every time a loan goes into to default. Due to the federal insurance, the higher the default rate, the less they get repaid. Having worked both sides of the industry myself, I truly believe that better education is require for lending. I think all freshman should be required to take a cource on financial aid management. Enough said!!!

What a load of...
I don't know one student that has defaulted on a student loan and cc that toured europe. The number one reason for default is NOT cause they didn't inform the collection agency of there current residence. That is absurd. The number one reason is the economy. Few quality jobs, period. Numbers don't lie.

These are actually cases that I dealt with over the 10 years I was in collections. The lenders will work with the students as long as they contact them!! Yes the economy has been hurting but that is what the consolidation loan program and the ICR payment was created for!! There are always options for borrower whether it be defering loans, forbaring loans or the servicers hardship program. Most borrowers contact the lender too late in the ball game to be eligible. Grace period after school is 6 months. Students will call in month ten with "I dont have a job" when they should have been calling before the end of the grace period.
<<Stafford and Perkins loans:

Principal and interest payments may be deferred while the borrower is:

- Attending school at least halftime.
- Unemployed (up to three years).
- Studying in an approved graduate fellowship or rehabilitation program for the disabled.
- Experiencing economic hardship (up to three years). >>

I would skip down students off credit bureaus...they would have perfect credit other than the student loans. I often would find a new car loan "I forgot" or "I cant afford it now". This is what the lenders are hearing. My point is that students are waiting too long, past the point of no return because they didnt know what they were getting into. Hell I collected from an Academy Award winner because he "forgot" about his school loan to Julliard. NFL players (at least 3 in my area alone), the Waltons cast members, politians...tell me these people didnt have money?? Nope, they didnt pay attention, moved, changed their names. We had to track them down. That costs money. Now I worked for an extremely reputatble agency and we worked with our debtors. And we made money....boy did we earn money and we had fun!!! Then we were bought out by OSI...a bunch of slim balls. Training disappeared and violations ran rampant. That is when I switched over to be a financial aid officer. And yes, I got students trying to get into grad school after spending a year in Europe finding out they couldnt get into school or financial aid because they defaulted on their loans!! I could go on and on and on.....

I think Lynn’s basic premise is right for the most part, at least for me. Now, was I out buying expensive cars (or expensive anything, for that matter!) and going to Europe? Uh, no!! But then again, did I call the DOE when I was making $10/hour out of law school (yeah, that stereotype about all lawyers being rich is so not true!!!) and ask for help when there was NO WAY I could afford the payments? Uh, no. I think we’d all be well served by more education in personal finance, but not at the college level – long before that. It goes way beyond student loans and by the time you’re in college, it’s too late to start learning it. For me anyway, I certainly didn’t have perfect credit apart from the student loans; they were merely part of the whole pattern.

We could get into a philosophical argument about the cost of college vs. the return on investment (e.g., the salary you get with the degree), which I think is a huge part of the problem (I came out of law school with $65,000 in debt from a PUBLIC school and work in government, which translates to “low wages”). There are a ton of reasons why default happens and, I assume anyway, that Lynn isn’t saying that 99.9% of those who default are lowlifes trying to cheat the system (are you?? ), just that some of the responsibility lies with us. Even though I couldn’t afford the $700/month that they wanted me to pay, I probably wouldn’t have gone into default if I had talked to them and worked out some sort of affordable payment plan – that part of it is definitely my fault – I was certainly a “if I ignore it, it will go away” person when it came to my bills. Was DOE being really realistic in thinking that handing me a form to sign and never explaining it when I was 24 years old would make me understand the consequences of my actions? Not particularly. Do they go from nothing to garnishment in about 10 minutes? Um, yeah. Could they do a MUCH better job of educating people and really working with people having money problems, rather than just "pay us -- we're the government and can do many bad things to you -- too bad that you'll just have to be homeless now to make your payments."? Uh, DEFINITELY!!!

Lynn, it sounds like you really had a good system at your school by sitting down with your financial aid students and really doing “exit counseling.” At my school, they had mass “counseling sessions” set up where you came in at one of the times it was being offered, there was some video playing in the back of the room that they told us we could watch, but didn’t have to, then they had us sign some form and sent us on our way – 5 minutes, tops.

Do want to know what is even more scary now?? Our school was a completely paperless system, from filing out the app to doing e-signatures. More and more parents are doing ALL the paperwork. They are getting the pins, the reports and they are e-signing for the loans!! Another friend of mine at the U where I used to work is seeing countless of these cases coming thru. It is now in its 4th year, and she is seeing students who "thought" that their parents paid the whole tuition balances...they had no clue that they had loans!!!The paperwork would go the parents address, and these students would never see a thing.

I know that I also had the "if I ignore it, it will go away" attitude for a long time, and it did go away... for a while. It has caught up to me and become so much larger than it was. Do I wish I did things differently? Sure. I wish I would have had the forethought to go to community college for a couple of years and then moved onto a university rather than going to an out-of-state school that put me into seemingly insurmountable debt. I wish I would have worked harder to find and apply for scholarships and other sorts of aid. I wish I would have gone into a more lucrative line of work. I wish, I wish, I wish...

I think that most of us who have defaulted and visit this forum are not here to shirk our responsibilities. We want to make it right. Sure, I wish they would just go away and I wouldn't have to pay them, but I know that won't happen, so now I'm going to deal with them.

Over the past 18 months I've rehabilitated two loans and am about to make a settlement offer to a CA on a third. The loan amounts are huge and my salary is not, but I am going to make an honest effort to pay something and get on the right track.

Good luck, everyone.

Default from the defaultee point of view: Bad things happen. If I told you what happened, it would make you cringe. Sometimes people's lives really are shattered by events outside of their control.
5 years later I am still having nightmares about it.
No, I don't expect it to go away. I was out of college for nearly 10 years before my loans went into default.
Did I go to Europe on the proceeds of my student loans?
No. And the people I know did not either.

Believe me. after 10 years in collections, nothing would make me cringe. And if you were out of school for 10 years before you defaulted, obviously you were in contact with your lenders or else you would have defaulted in the first year out of school!

I've never been in default, but I was close once. It really was my own stupidity. I did send in a forebearance THREE TIMES, but for some reason they kept losing it. These days, I'd send it CMRRR.




Maybe as seniors, not freshmen. You want it to be recent.

You know, that's partially the case, and I didn't default on my prior SL, but I did have a hard time locating it.

Why?

Because.

I signed the Guarantee papers with Bank A. Bank A sold it to Bank B. Bank B merged with Bank C to become Bank D. Bank D then sold it to Bank E. Bank E then sold it to a Loan Servicer.

It took me months to track down my loan, so that I could catch it before it came out of deferrment so I wouldn't default. But I was already older than your average 18 year old.

This, of course, was before there were websites to find out who had your loan and such.

I just started back to school. My loan has been sold twice in one semester, including to a loan servicer. Thankfully, I'm older than your average student, and know more about protecting my credit and my money.

Personally, I feel while students are in school, they consider that "free" money, until of course its time to pay. The student feels like someone is taking their money away and forgetting they actually agreed borrow the money WITH interest.
As a student, I had this problem as well, its hard gage the concept of money while attending school and what it means to pay it back. Not to mention the consequences.
Going to Europe would be weird. If my parents could afford me to send me to Europe, I wouldnt have student loans to begin with.
At first, student loans were a pain to pay back, felt like I was just giving them MY hard earned money.
I didnt understand how serious it is to pay the money back!
After thinking about it, without that money I wouldnt have went to a good school, graduated, etc....
I think the reasons for not paying is really kind of a denial, thinking maybe the banks forgot or something.
I didnt think that far ahead while I was in school, like doing the math with my how much money I was going to make, how much my bills were, etc..
It was like..ohhh, im having too much fun, i'll worry about when i graduate!
Then its like WE WANT OUR MONEY!!
Te first glimpse of how serious it is was watching "Nothern Exposure". Didnt the doctor get sent to Alaska cause of his student loans problem?
Citibank is pretty good about working with people as long as they call to tell them whats going on.
Borrowing money to get an education is a good thing right?

redcar,
When I was in school I saw the money as an investment. When I graduated, I would have a job and that job would repay the loans.
Well. I have NEVER directly used my degree.
English, religion, psychology, and philosophy degrees and how do I earn a lving?
As a gemstone dealer.

I think many kids are just not educated on what direction they need to go. They go to a 4 year university when what they really need is a trade school,or a community college... which in most cases is much less costly.

If I had known I could have, I would have taken the 2 year GIA course, instead of what I did. I would have been able to get a good job, would have owed about 25% of what I do and it would have been a "career" doing someting that I love.

Fortunately, I can still see a way to a substantial income in a few years.

Silverwings,
Whats a GIA course? Not many people work in the field in which they earned their degree in.
You have 4 degrees?

I think all of the above are true. Perhaps the government backed loans could required a mini-course in handling finances and what can happen if you default. A smart as college students are, they still are not really aware how the system works. An ounce of prevention is worth a pound of cure.

I agree that a lot of the trouble is due to the student's fault, probably most of the problems are due to the student's inability to deal with the situation.

However, I have a problem with the perpception that money is available and the student prefers to go to Europe, eat out every night or buy expensive designer goods rather than pay student loans. I constantly hear jokes about students charging pizzas every night on their credit cards as being the "real problem" with students and debt.

Why is it that I never hear anyone talk about the fact that most students today are graduating with "unmanagement" debt loads. Yes, unmanageable when you consider that 90-95% of the jobs we are creating currently are in the service sector. The average undergraduate is graduating with approx. $15,000 in student loan debt and maybe an additional $5,000-10,000 in other personal debt. Graduate debt loan is obscene. Graduate students are graduating with $75,000+ in student loan debt. Most entered graduate school with the notion that a graduate degree would be their entry into a career that could sustain them financially. Why? Because they see people who graduated in the 70's and 80's who are making good salaries with good careers. What they don't realize is that these people graduated with student loan debt of maybe $5,000-15,000 that could be paid over a ten year period. Today students are finding that even if they can land a job, it pays $20-25,000 a year. You can't pay basic living expenses on that salary. Add to that an uncertain economy, job loss, underemployment, etc. I owe the equivalent of a mortgage in student loan debt, it's overwhelming.

Somehow we've created a great environment in this country for businesses to regroup financially, maybe we actually can start assisting individual people rather than forcing them into bankruptcy.

Let's get real and start talking about the real problems for a change.

GIA= Gemological Institute of America
When you go to a jewelry store and they say they have a gemmologist on staff, it is usually a GIA grad they are talking about.
These are the people who grade diamonds, write up certificates for what the stones are. There are other gem grading schools and but GIA has the best reputation.
Basically it means I could have found a job as a gemmologist at a livable salary.
I still could do it, but if only I had known...
Sure, I have 4 degrees, done in the space of 5 years. Anyone who knows liberal arts, though, knows these are not heavyweight degrees. I was then accepted in a master's program for fine arts, the Iowa Writer's Workshop. I chose not to go.
My student loans are so high due to the default and interest accrual since they defaulted.

Well, I am a poster child for the original poster's comments. I took loans that I did not need as an undergrad (I was on scholarship) and used the money to travel, eat out, etc. I then went to graduate school and took more loan money than I needed and spent it frivolously. I did get a very high paying job out of graduate school, but I was clueless about money. I went to work in Europe for three years and never informed any bank anywhere. Of course my loans all went into default. I did not deal with them until my bad credit was starting to affect my life (paying for everything via debit card, etc). I have now consolidated them and paid about half of them off.

Would an educational seminar about financial good practices given to me in school when I signed for the loans have prevented any of this? No. I was young and clueless and I did not see the debt as "real".

On the other side of the equation, my loans changed hands 6-8 times a piece. There were no websites to track them down. I had no idea who owned my loans. It took the CA handling my consolidation 3 MONTHS to track them all down. How could I have done this by myself with no knowledge of the system? It's only been a few years that loan information has been easy to find on the web.

I am not sure that there is anything that can be done to teach a 22 year old the value of good credit and financial responsibility. Each person learns at his/her own pace. I don't think a seminar will speed the learning up, but that is just my opinion.

I learned when I felt the consequences of my actions. I learned when I was ready to grow up, which unfortunately was much later than the deferment period on my loan.


lgt

With Direct Lending being in more and more schools, loans will be easier to track. There will not be multiple sales and servicer transfers. This is helping.

I believe all student taking financial aid should be required to take a financial aid seminar as soon as they start taking out loans. Then there should be a required financial aid exit interview...no interview, no graduation. I know that the University of Minnesota Law school now has such a course.

Agreed. But in my case it would not have made a difference because money that will be earned and spent in the future (ie after graduation) would not and did not seem real to me when I was a student. I thought of the loan money as "income" and even though many people tried to tell me that it was a loan, not a gift, I did not see it that way until I had to pay it back and even then I just wanted it to "go away".

What would have stopped me from defaulting? I think that one loan from one school/bank with a website to go to and pay or defer etc. instead of the tangled hair ball of loans that I had would have helped. But basically, I had to learn the hard way. Basically I agree with what you are saying in principle LynnInMN, I am just waxing philosophical here. I am just not sure that the seminars will get through to students like me who did not see the debt as something tangible and real.

lgt

Thank you, Lynn.
Now, I really look forward to future advice from you.
Your insight and experience should help out a lot of people here, in terms of how to get back on track with things.

I graduate in May with a degree in education. I have already contacted my SL company several times. A few times they had sent me bills when I was in deferment. I got that corrected. I called in December because I received notice of SL payments being scheduled sooner than they should. I couldn't register for student teaching until January and the SL people thought I was out of school.

I don't know what the difference is for me, except that I watched my parents pay student loans consistently. My school had us pass a test on SL's as freshman before we were eligible for financial aid. I have to do 2 exit interviews sometime in April or so. But then, my brother saw the same thing with my parents and went to the same school. Guess what? He does not pay his SL's regularly. He claims he likes to pay a lot just every few months, not a little bit every month. (???)

People can't help certain life situations. But maybe for the rest, it is like another poster said. They just don't fully understand and think they will go away.

Is your brother aware of the damage he is doing to his credit report?? He is going to have a mess of late pays in there.

Everyone has told him and apparently he doesn't care. He has the money to pay every month, he just puts his bills off. I don't know what anyone could say that hasn't been said before. Maybe reality will hit home when he actually tries to get a house. The funny thing is he is older than me by 4 years. I'm 22 and am more concerned with credit and credit reports than him (or anyone else in my family for that matter).

i dont know what the "number one " reason is, but i know that i had a default because i moved and did not receive due diligence notices. i have rehab'ed the loan with the guarantor and i am trying to see if i can get the original lender to remove the default.

Here's a story about default.

I started out on a bad foot by turning down a full ride for the school my family wanted me to go to. After just three semesters with bad grades and mono, I had to leave school with a total of 14K in debt. ( 7K SL and 7K school debt)

I went into default mostly out of a combination of fear and denial (I just didn't think I could face my family with all failure). I lived away from home and tried to find work but I had little skills and few resources.

Two years later I decided to come home and try and get my life together. I wanted to start over at a state school. This was not happening until I had access to my transcript and that was going to take 7k paid to my old U. I called my lender and they informed me that my loans were now in default. I almost had a heart attack. Maybe not, but I probably did have a mild case of depression.

It took a couple of years for me to finally pay my original undergrad the 7K. I finally did but I still had this default judgement over my head. I just kept plugging away and saving. I went to a local community college to get some credits under my belt and rebuild my accademic confidence.

After about 2 years of this I was ready to transfer. I was accepted at a number of schools, even an IVY. I decided to go to the local state U because it was the cheapest. I still was not financially eligible for aid, but atleast I was back in school. I then began to notice money missing from my pay. What the hell? Can you say garnishment. I called the lender and tried to set up a rehab. A couple of months later the company I was working for went out of business. I was now broke and I still had the default judgement over my head.

Now I had to get some cheesy job just to try and go part-time. I figured that once I had my degree, I would be making enough money to pay off these loans. Yeah right.

I had already learned that life wouldn't always comply with my plans. I soon found that Death just did't give a S$%T about my plans. The Aunt I was living with died. I soon had rent and expenses that made even part time school not seem doable. Exit school stage left.

After being slapped around by life for about a year, I did some real soul searching. I found that I really wanted to finish something that I had started. It was time to dust myself off and grow a pair! I decided to once again start over. I needed to give it one more try, just for myself and my own sanity.

Its been a slow 2 years and a lot of ramen noodle but I am now just 3 classes from my degree and both my student loans are rehabbed! I just checked my reports+scores and YES! Look at me now!

TU 709
EQ 734
EX 696

Hell, if I can go through the wringer and make it out the other side, anyone can.

CONGRATS SHAZ! that's very moving. i love stories like that. you have really turned it around!

query: how did you get your original lender to remove the defaults? i assume after default the loan went to a private guarantor or to the u.s. doe, and that they deleted the negative info. how did you convince the original lender to do so?

Hey Shaz,

I was just wondering how many years total it has taken you since you started? Good job on going back to finish. I have been on and off several years ( medical, family, money problems,severe depression,etc)myself and sometimes I feel its worth it and sometimes not.

Honestly, I am not sure about the history of my loans. I have no idea where they have been or how many people have had there hands on them. I assume that I got VERY lucky because they were so old and collection companies thought they were a lost cause. These loans were originally from '91 and '92.

I honestly think that I was either lucky or blessed. I have a twin brother who is a teacher with a wife, a masters in education and over 100,000k in SL debt. He did everything right and my scores pawn his. He can't even understand my scores. In some weird way my misfortune has been a benefit. (I always see the silver lining) I hope to soon be in position to help him pay down his debt.

As for my loans:

All I know is that once my loans were rehabbed, the fees and penalties were forgiven and my credit reports were clean. (YES)

My credit was so bad that I was unable to screw it up any worse. Hell, who was going to take a chance on me?

This whole credit thing is really insane.

It's like credit is some board game that we are all forced to play without an instruction manual. Is it any surprise that so many of us find ourselves way behind in the score.

Is it really fare that I took out more in loans than the OP but owed so much less?

What it all means:

I am applying to law school this summer and you better believe I will be going to the school that is best for my pocket! Penn at 50k per v. Temple on full ride? I think Temple is the one for me! () Ah, to dream!

An EDIT for my earlier post: That should not say OP as in the original poster. It should read: Is it fare that some posters took out less in SLs but now owe more than me?





Started school or started the credit repare?

I am now 31 and I started college at 17. Not very prestigious huh?

As for the credit repare:

I only got serious about it in the last 18 months. I picked up the phone and called one of the credit agencies and started the rehab. Shortly there after the other holder of one of my student loans called me. I started a rehab with them as well. It was really tight on my budget for a while but both are now rehabbed and my reports show them as credit history going back 13+ years. I had some small credit card debt (store and gas card) that are now SOL. Too bad for them. They were both 10+years old. By rules of compound interest I would be a small third world country if not for SOL.

The thing is my credit was bad for so long that I was prevented from doing too much more damage to it. That was a blessing though I was unaware of it.

As for depression, think how satisfying it will be the day you finally finish school. Just getting close has really put a daily smile on my face. When I think where I was and where I am today...*tear*...I may be 31 now but my future is so bright, I need some raybans.

My only regret is that I did not take any classes from 2000 until the summer of 2003. But you know, what if I was not eligible for that SOL? No regrets. What does not kill you will only make you stronger is true. I believe it was Antoine Fisher who said, "I'm still strong!"

Ralph Waldo Emerson said, "A man can not free himself by any self-denying ordinances...nor by paying his debt with money; only by obedience to his own genious."

You got to listen to yourself. You have to make yourself happy. I knew that reparing my credit was just one of the things I needed to do on the way to becoming who I wanted to be. I knew that I wanted to be a college graduate and a professional "something" to be happy. I know it is sick but hey that's me. I am now on my way and I am SO happy. With all I have been through I know that if I stumble along the way, I can always give it one more try.

Don't let anyone be a distraction to you. You won't believe the negative things people have said to me over the years! Keep plugging away and its going to happen.

I honestly don't know why "most" students default. But I can tell you my story.

I signed every single one of my promissory notes except one. That was signed by a friend who had power of attorney for me while I was doing an internship overseas. I have every single one of those documents. I capitalized my interest. I knew that I had built up a substantial debt, but I also had an employment and life plan that would enable me to pay it.

After I graduated, I searched for jobs for months. In truth, I'm still looking for a job that is related to what I went to school for. It's been eight years. In the interim, I've been through periods of underemployment and illness. I finally took a job, just because it would have a regular paycheck and benefits. It's an admin. job. I have a graduate degree.

In the meantime, the Dept. of Ed started sending mail to... an address that I had never lived at while I was in school. I don't know where they got it. The addresses that I had filled in on the promissory notes, was the address where I still lived. I never received any mail from them there. Finally, they started calling me. I was shocked at the address they had and corrected it. They explained the payment issues, I asked for forbearance. I was told they would send me a form. We had at least half a dozen conversations like that. I never got the form. I was basically unemployed, ill and without benefits, and unable to work full-time anyway. I had bigger things to worry out. I rather arbitrarily decided that if they wanted me, they knew where to find me. AT THE ADDRESS I PUT ON ALL THE PAPERWORK I HAD EVER FILLED OUT RELATED TO THE LOANS!

I am now in a rehab program. I have every intention of paying back all the money I borrowed, even though I have no practical plan for that anymore. I still blame DOE for the default, and always will. But DOE is "above" blame. So will all just get on with it.

Yeah, my brother mailed his in three times, faxed it twice and they STILL SAY "We never got it." And they send ME his info (with personal info on it), to an address he's NEVER lived at or claimed. Sometimes I think lenders don't know their butts from a hole in the ground...

Then I actually called WF a month before I'd even need to to get a deferment, and they said "Call back later, we don't wanna do it right now." Well, I'm sorry, it's NOT ABOUT YOU. If I know I can't pay it and I'm *trying* to work with ya, why do you want to put it off? I wasn't able to call until my first payment was past due, but luckily they back-dated the deferment so that it wouldn't show that.

I don't agree with MOST of what the OP said in her original post, but I'm not going to comment on that other than to say sometimes life happens, and you can't ALWAYS stay on top of things.