Resolving student loan defaults
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#1 Aug 22, 2009
Loan rehab sounds almost like a God send. That is, until you step into the reality of someone who has actually been faced with this dilemna.
As someone in default, allow me to edify you and your readers on reality. I left grad school with $38,000 in debt with an advanced degree in social work. As a result of family illness, tragedy and low paying entry level jobs, I found myself in the unfortunate situation of financial ruin.
Fast forward several years. I finally dug myself out of a hole and began the task of righting my debts. Most creditors were more than happy to work with me. That is with the exception of those charged with collecting my student loan debt.
In addition to finding that my debt had alreay exploded to well over double its original amount, the collection agency was unwilling to negotiate any kind of terms that I was able to honor. They opted instead to impose a garnishment on my pay which they are able to do without any due process at all. By the time I was even advised of a rehab option the balance had exploded even further.
I would love to rehab my loan, but the simple math of doing so at this point is quite prohibitive.
I am 50 years old. Even if I could negotiate an amount that I could manage for the rehab process (which I have been unable to do), I would then be faced with signing a new promissory note with the following terms. My balance has increased to over $100,000. Providing someone would purchase my note ( which is currently in question), and assuming I took a 25 year term with monthly payments anywhere from $600 -$800, by the time I payed off my loan I would have payed between $180.000 and $240,000 for a $38,000 loan.
While that may be a mighty nice return for the lenders, I would have to be pretty foolish to willingly agree to this arrangement. By the way, I would be 75 years old by the time I finished paying.
The reality is that student loans have clearly emerged as the most predatory loan instrument in U.S. history. Positively no other loan instrument I know of would even allow, under law, the scenario I have provided.
Make no mistake, my situation is far from unique. Aprox. 1 in 3 will be forced into default over the course of repayment. Student loans are the only kind of loan essentially void of all consumer protections that prevent borrowers from being exploited in the manner that I have described.
So thanks for trying to help, but please- going forward - tell the whole story.
#2 Aug 22, 2009
I have a defaulted Direct Loan, am in the process of setting up a rehab and now; "facts" in this article don't match what I am experiencing right now:
1)The Department of ED won't talk to me, they have handed me over to a collection agency, and so that is who I must deal with.
2)The payment plan is anything but affordable. The lowest they are willing to go, if you add the amount already coming out of my paycheck through garnishment, together those would amount to HALF of my take home pay. How this can be considered legally or ethically "affordable" is beyond me, but apparently there are no other options.
3)I have been told that collection costs/fees are dropped from the amount that is essentially refinanced if the loan is successfully refinanced.
4)I understand that the purchase of these rehabbed loans has recently been assured through changes in the law that will allow the govenment/dept of Ed to buy them themselves.
#3 Aug 22, 2009
Know the devil you are dealing with before you sign your soul away. KIDS !!!
#4 Aug 22, 2009
I took out loans in 87. Filed bankruptcy in 94 when you still could. Nothing heard for 13 years. Then a collections agency contacts me.
K in Oregan is correct. Dept of Ed will not talk to you. I have no paperwork, and asked for copies of the original paperwork. I got 150 pages of unreadable and incomplete garbage.
A lot has changed since the late 80's. Government recoginzed a group of student victims (and I hate using that word) of the 1980's trade schools, in US Senate report 102-58.
I found out my original lender went bankrupt the same month I did. I found the government website and did what I had to do to sign in and found out I had 5 loans, now held by Bank of America who has NEVER tried to contact me. I still cannot get complete readable copies of the original contracts. One 3rd party parasite (collections company) said they would take me to court and provide the original pen and ink copies, so I gave them the local courts address and phone number, and a copy of the supena I would submit to get those copies; Never heard another word from those idiots again.
According to the information I have been able to find out, the original loans totaled about 15k. Now government claims somewhere between 30 and 50K depending on who is contacting me. Half of that is fees and interest on fees. Even if I started paying now, I would be retired befor I would get them paid off and I would have paid over 140,000 on a 15k group of loans. That is slavery.
I had consumer protections, they were removed without my concent. I never would have signed the paperwork without them. The schools misrepresented themselves, but during the late 80's and early 90s we did not have the internet, which today is so vital to learning about student loans and the predatory scam that they are.
Due to the bad economy I have worked a total of 5 years out of the last 9, with various lengths of unemployment inbetween. I no sooner get out of one finanical hole, when I get laid off again or the company closes its doors. I am in michigan, whose economy has been dismal at best, for the last 8 years.
I would say that the government is involved in "honest services fraud" by the way it treates students and the way it goes about entrapping students into loans that contain no consumer protections.
And the service industry, like Sallie Mae (thank God I don't have to deal with them), are nothing but exploiters of students.
I agree, once you are in default, you have no rights, you have no say, and you are doomed to a 3rd class existance.
Thank you for cheating me with your con job, National Education Center(Now out of business), and US Dept of Education with your fraudulent student loan contracts.(they failed to make full disclosure of the fact that they could remove consumer protections without our concent).
I have finally accepted the fact that I will die a poor man, becasue these loans will haunt me till the day I die becaus I cannot give them half my take home pay and still live on 800 a month or less.
#5 Aug 23, 2009
The real crime is charging someone $38,000 for an "advanced degree in social work". Might as well buy used Honda tires for the same amount.
Now you know where these liberal ideas will bring you. Where could you possibly work except for the government at some low wage?
I don't get it.
#6 Aug 23, 2009
What part of this didn't you liberals get? If I got my doctorate in social work instead of law I'd be in charge of the famous "Cash for Clunkers" fiasco instead of on the supreme court.
Now how about some "brillants"? Gratias.
#7 Aug 24, 2009
This is problem with a substandard solution and it's precisely why we created "SafeStart" ( www.yoursafestart.com ): to help college graduates manage their loan payments in the event of economic hardship and to avoid delinquency/default.
#8 Aug 24, 2009
In broke CA, the state has cut funding for UC and CSU education by some 15%, sending students to rattle the closed gates of community colleges, which cannot take them because the state cut student funding by about 20% come spring. I succumbed to the glowy pastiche of an ivory tower humanities Ph.D. and took out in 1992 40K in Stafford and Supplemental loans to do it--while working as a GTA at SUNY for the three years I attended. After graduating I earned some 30K a year as an "at will" part-time instructor at seeral community colleges in the area. If I didn't get classes or my EDD ran out, I emptied my meger savings to pay back the loans. The correlation between an advanced degree and a good job is getting smaller and smaller. Students need to seriously evaluate whether they want to become in debt for life to be able to say they went to a "prestige" college. Medical professions might be worth the 100K in loans, but few other professions, including rocket scientist, are worth the risk.
#9 Aug 24, 2009
I'M to my eyeballs in my student loan that I will never be able to pay even if God give another 50 more years, Why don't put some stimulus money to give teachers and other professionals that are struggling with the debt that grows as we speak because of the interest...Pleas Mr. Obama give us a brake...Thanks...!
#10 Aug 24, 2009
my minimum payment around 550 which will cover interest only on 40k (btw, no degree). Original around 17k. I make 14 an hour right now and will be laid of most likely in a few weeks when my temp contract ends. The back to pounding the pavement. We need reform for defaulters now. Credit agencies want half your paycheck each month or they say no deal. Sorry cant do that. no.
#13 Aug 26, 2009
So so where were you in 1985?
#14 Aug 26, 2009
First of all I have 3 standing policies:
1. I catagoricaly refuse to deal with 3rd party collections agencies (parasites).
2. I bill them 1,000 dollars for compelled services rendered for each time I have to reply to them as they are not the original creditors.
3. Untill I get a complete, and 100 percent readable copy of the original pen and ink contract, any futur attemts to collect on an alleged debt, will be seen as construtive fraud and honest services fraud, and I then begin collecting evidence necessary to swear out warrents for the arrest of the people involved.
That so far, has stopped them dead in their tracts.
Yeah, I know how you feel. I have gotten down right ornary with these people. I mean I have gotten MEAN with them. I cuss them out, I go on the verbal attack, asking about their hearatage and if they cheated on their spouces last night or what..
As for the endless paperwork and other things, from the so called service industries, seems to me its high time for a major lawsuit of some kind. If these were any other kinds of loans we would be treated differently..
Like I said earlier, and now I mention it again. These people these schools and lenders are ingaged in honest services fraud. Thats how we bring an end to this nightmare.
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