Silly Student Loan Folks

[treehugger1]

I finally got a call form my student loan servicer today. They informed me that I was within 8 days of the 270 day default. DUH. I laid everything out for the gentleman. In particular, I explained my recent lawsuit and the fact that I did not give a rat's a** about creidt. He attempted to explain that my tax refunds could be taken. I explained that I don;t get tax refunds and I'm currently in a repayment plan with the IRS. I made it crystal clear that I expected the servicer to forward my defaulted loan to the dept. of education after 270 days and I demanded the 15% wage garnishment. He put me on hold for about 5 minutes while he went to speak with his "supervisor." When he returned he attempted to tell me I could now get another THREE YEARS of deferment/forebearance. What a bunch of goofballs. I'm giving them their soultion, but they can't see the forest because of the trees. The conversation ended with me explaining the BK 13 issue related to student loans in my district and the interest over five years would clearly exceed the 20% addon before sent to the DOE. I don't think he really understood the predicament that I am technically bankrupt! I guess someone telling them that they would welcome a 15% wage garnishment is not in the playbook they have. Good God, I acknowledged the debt and gave them explicit instructions as to how the student loans will have to be repaid.

All I can say is that the servicers do not want you to default on the loans. Why? My best guess is that if they forward the loans to the dept. of education, they lose all control and all interest they would receive over the next 25 years. The interest amounts to far more than the default addon of 20 - 25% that gets added before the loan is sent to the DOE for administrative garnishment. Once th DOE has the loan, it is my understanding that the interest stops and they attempt garnishment on the total amount owing.

I guess I am not surprised that the servicer doesn't get, "I am not paying you another dime." I am surprised that they would waste their time attempting to collect on a debt where the debtor has made it crystal clear what the servicers options are.

He ended by saying that "collection calls will continue." LOL. I ended by saying that they better hurry up with the process as I have been sued by a creditor that could be "first-in-line" for a total 25% garnishment.

What I got out of the call is that creditors still believe that threatening someone with a potential of bad credit has any clout these days.

I will call them in 8 days (270 days to default) and request they send the damned loan to the DOA for wage garnishment. I'm guessing this could take YEARS! I will also send an email to my local congressmen/women and perhaps even send them the recorded call. The government can get their money from me quite easily, but there must be something in the process that does not account for a debtor who BEGS for the wage garnishment.

[AngelinaCatHub]

Treehugger1: Interesting, as well as funny. Where the heck have you been??? Not seen you in ages.

Well your thread is informative but not able to contribute. I admire your POWER over these goons. Good for you. You quoted everything they already know. Give them three years, then tell them the same thing. "Hub

[treehugger1]

ACat, I have been dealing with helping get a parent, who has dementia, into a Medicaid approved nursing home. That's the priority for me. The costs are staggering, and I doubt any CA/OC/JDB has any clue as to the priorities in my life. I think they cannot grasp the fact that the current economy has hit everyone from minimum wage to high-wage earner. I'm sure they will all get it very soon. I chuckle at the fact that anyone attempting to get money, spent by me, might have to deal with medicaid. LMAO

[frogger]

I doubt any CA/OC/JDB has any clue as to the priorities in my life. I think they cannot grasp the fact that the current economy has hit everyone from minimum wage to high-wage earner. LMAO

And the decisions are so easy to make once you establish your priorities. I've got some of those CA/OC/JDB people that want to talk to me, but they can go pound sand as far as I'm concerned. They can't whip me and they can't eat me, so what are they going to do? Ruin my credit score? hahahahahaha

[jacko]

I am currently on deferment/forebearance with the USDOE through March 2010. So, If I let my student loan go into default, the interest accumulation stops? Are there other fees added?

I finally got a call form my student loan servicer today. They informed me that I was within 8 days of the 270 day default. DUH. I laid everything out for the gentleman. In particular, I explained my recent lawsuit and the fact that I did not give a rat's a** about creidt. He attempted to explain that my tax refunds could be taken. I explained that I don;t get tax refunds and I'm currently in a repayment plan with the IRS. I made it crystal clear that I expected the servicer to forward my defaulted loan to the dept. of education after 270 days and I demanded the 15% wage garnishment. He put me on hold for about 5 minutes while he went to speak with his "supervisor." When he returned he attempted to tell me I could now get another THREE YEARS of deferment/forebearance. What a bunch of goofballs. I'm giving them their soultion, but they can't see the forest because of the trees. The conversation ended with me explaining the BK 13 issue related to student loans in my district and the interest over five years would clearly exceed the 20% addon before sent to the DOE. I don't think he really understood the predicament that I am technically bankrupt! I guess someone telling them that they would welcome a 15% wage garnishment is not in the playbook they have. Good God, I acknowledged the debt and gave them explicit instructions as to how the student loans will have to be repaid.

All I can say is that the servicers do not want you to default on the loans. Why? My best guess is that if they forward the loans to the dept. of education, they lose all control and all interest they would receive over the next 25 years. The interest amounts to far more than the default addon of 20 - 25% that gets added before the loan is sent to the DOE for administrative garnishment. Once th DOE has the loan, it is my understanding that the interest stops and they attempt garnishment on the total amount owing.

I guess I am not surprised that the servicer doesn't get, "I am not paying you another dime." I am surprised that they would waste their time attempting to collect on a debt where the debtor has made it crystal clear what the servicers options are.

He ended by saying that "collection calls will continue." LOL. I ended by saying that they better hurry up with the process as I have been sued by a creditor that could be "first-in-line" for a total 25% garnishment.

What I got out of the call is that creditors still believe that threatening someone with a potential of bad credit has any clout these days.

I will call them in 8 days (270 days to default) and request they send the damned loan to the DOA for wage garnishment. I'm guessing this could take YEARS! I will also send an email to my local congressmen/women and perhaps even send them the recorded call. The government can get their money from me quite easily, but there must be something in the process that does not account for a debtor who BEGS for the wage garnishment.

[backtoschool]

I am currently on deferment/forebearance with the USDOE through March 2010. So, If I let my student loan go into default, the interest accumulation stops? Are there other fees added?

The interest still accumulates, it just goes to the department of education, not the loan originator. Also a 25% admin fee is added to the loan when you default.

[backtoschool]

Here is some info from the dept of ed on collection costs and defaulted student loans:


Federal regulations concerning campus-based loan programs, such as the Perkins Loan, suggest that collection costs may not reasonably exceed 30% of the principal, interest and late charges collected on the loan, plus any court costs, for first collection efforts. For second collection efforts, the percentage increases to 40%. For Perkins loans made from 1981 through 1986, many promissory notes limited collection costs to 25% of the outstanding principal and interest due on the loan. Since then, however, promissory notes have had no such restriction.

For loans held by the US Department of Education (e.g., Federal Direct Stafford Loans), the department assesses collection costs at a rate of 25% of the outstanding principal and interest due on the loan (or 20% of the payment). FFELP lenders are limited to a similar amount. For an analysis of the impact of these collection costs, see FinAid's Loan Default Calculator and Collection Cost Impact Chart.

When consolidating a defaulted loan, collection costs of up to 18.5% of the outstanding principal and interest may be included in the amount consolidated. So a collection agency might be willing to reduce its fees to 18.5% if the student consolidates his or her loans. But the collection agency is under no obligation to do so. So if the student consolidates his or her loans and the collection agency does not reduce its fees, the student must pay the amount in excess of 18.5%.

If you work out a payment schedule within 60 days of default, some collection agencies will waive or reduce the collection fee.

Overall, it appears that collection costs can legally be as high as 40%, perhaps even higher.

[treehugger1]

I think the additional interest and admin fees can't exceed 25%. I'm not 100% sure.

Here is scenario though. Suppose I owe $80K in student loans and file for BK 13 in my district. The loans are put on hold for the five years of the plan. My interest rate (these are older loans and none qualify for the new Ford ReConsolidation or reduced interest) is 8.3%. Over five years, the total amount grows to:

$119, 187.93 Yee, Haw!!

At the administrative fee of 25%, the total immediately becomes: $100,000.

Now, either way the loans must be paid, either after the BK 13 or via wage garnishment as soon as they can get their act together. Even if interest continues after return to the DOE, the wage agarnishment will address the debt much quicker. If I decide to ride out my financial dilemma for a few more years and do not file BK 13, then the 15% wage garnishment will begin to pay these loans down. Other creditors/CA's/JDB's would have to get in line to get the other 10%.

A 15% wage garnishment on this loan pays the $100,000 + interest in approximately 15 years. My past plan would take another 28 years to pay off.

If the DOE does not continue the interest, then a 15% wage garnishment pays the $100K in about 9.1 years.

It is possible that the servicer will employ an outside CA prior to dumping the loans with the DOE. I would simply repeat my mantra to any CA, "I will not voluntarily pay these loans at this time. Either send them to DOE or change the BK codes."

In the end, from a purely financial point-of-view, it is better to default and demand the servicer immediately send the loan to DOE. I think some of you are correct. I have clearly stated that I will not repay this debt voluntarily. I have suggested to them that they get the process going that returns the loan to DOE and hurry up with the wage garnishment.

I'm not the only high-wage earner considering this approach. I've spoken with several high-wage folks who are deeply in debt with huge student loans. They have not declared BK and while their credit score takes a beating, they are at least paying down the SL's. Student loans are a very real glitch in the bankruptcy system for many people who cannot file a BK 7. At least with a BK 7 the process is completed quite rapidly, and the debtor can get after paying their student loans immediately.

[backtoschool]

I think the additional interest and admin fees can't exceed 25%. I'm not 100% sure.

Here is scenario though. Suppose I owe $80K in student loans and file for BK 13 in my district. The loans are put on hold for the five years of the plan. My interest rate (these are older loans and none qualify for the new Ford ReConsolidation or reduced interest) is 8.3%. Over five years, the total amount grows to:

$119, 187.93 Yee, Haw!!

At the administrative fee of 25%, the total immediately becomes: $100,000.

Now, either way the loans must be paid, either after the BK 13 or via wage garnishment as soon as they can get their act together. Even if interest continues after return to the DOE, the wage agarnishment will address the debt much quicker. If I decide to ride out my financial dilemma for a few more years and do not file BK 13, then the 15% wage garnishment will begin to pay these loans down. Other creditors/CA's/JDB's would have to get in line to get the other 10%.

A 15% wage garnishment on this loan pays the $100,000 + interest in approximately 15 years. My past plan would take another 28 years to pay off.

If the DOE does not continue the interest, then a 15% wage garnishment pays the $100K in about 9.1 years.

In the end, from a purely financial point-of-view, it is better to default and demand the servicer immediately send the loan to DOE. I think some of you are correct. I have clearly stated that will not repay this debt voluntarily. I have suggested to them that they get the process going that returns the loan to DOE and hurry up with the wage garnishment.

I'm not the only high-wage earner considering this approach. I've spoken with several high-wage folks who are deeply in debt with huge student loans. They have not declared BK and while their credit score takes a beating, they are at least paying down the SL's. Student loans are a very real glitch in the bankruptcy system for many people who cannot file a BK 7. At least with a BK 7 the process is completed quite rapidly, and the debtor can get after paying their student loans immediately.

As a single woman who was making 175k a year before I was laid off in January and who has 100k in student loans, I totally understand your approach and was going to do the same thing at one point, but I decided to consolidate and fix my credit instead (this was about 9 years ago, a couple of years after I got out of graduate school...)

Back then, the admin fee was a fixed 25%. Now, it is variable and can be much more for private loans. For stafford and perkins loans it is 25%.

Interest does keep accruing though, at least that was the rule when I looked into this approach in 2005 when the company I worked for got acquired, and we all got laid off. I ended up getting a job relatively quickly at my same salary so I never went back into default. (I was on an unemployment deferment for a couple of months)

So, the only discrepancy between what I was told by dept of ed and what you wrote is regarding the interest continuing to accrue.

I think in your situation the approach makes total sense.

[treehugger1]

Thanks for the info. My loans are consolidated stafford loans dating back 20+ years. Yeah, I know, I worked the system through all legal remedies. But, life happens. Parents become ill and need support, older children become ill and need support, etc.

There is also the concern that even under wage garnishment, once a certian number of "payments" have been made, the loan can automatically be rehabilitated. In such a case, I've heard that upon rehabilitation, the default fees are reversed. I'm not really up on this, but then again it still would be better than the current situation. I don't want rehabilitated loans. I want the 15% wage garnishment, as this leaves only the 10% available for others. And, it is not fraudulent nor is it illegal. I didn't write the laws.

[backtoschool]

Thanks for the info. My loans are consolidated stafford loans dating back 20+ years. Yeah, I know, I worked the system through all legal remedies. But, life happens. Parents become ill and need support, older children become ill and need support, etc.

There is also the concern that even under wage garnishment, once a certian number of "payments" have been made, the loan can automatically be rehabilitated. In such a case, I've heard that upon rehabilitation, the default fees are reversed. I'm not really up on this, but then again it still would be better than the current situation. I don't want rehabilitated loans. I want the 15% wage garnishment, as this leaves only the 10% available for others. And, it is not fraudulent nor is it illegal. I didn't write the laws.

Rehabilitation only occurs if you make a certain number of complete payments in a certain period of time. Here is the dept of ed definition of rehabilitation:

To rehabilitate a Direct Loan, you must make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period to the U.S. Department of Education (Department). Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) will be returned to the Direct Loan Servicing Center.

So, in summary, you will never qualify for rehabilitation.

[jacko]

I though there was a cap on student loan payments. If balance not paid off in 25 years, its forgiven with a 1099 form sent to you and IRS with remaining forgiven balance taxed. That is what I heard, unless it was a dream...-)

I think the additional interest and admin fees can't exceed 25%. I'm not 100% sure.

Here is scenario though. Suppose I owe $80K in student loans and file for BK 13 in my district. The loans are put on hold for the five years of the plan. My interest rate (these are older loans and none qualify for the new Ford ReConsolidation or reduced interest) is 8.3%. Over five years, the total amount grows to:

$119, 187.93 Yee, Haw!!

At the administrative fee of 25%, the total immediately becomes: $100,000.

Now, either way the loans must be paid, either after the BK 13 or via wage garnishment as soon as they can get their act together. Even if interest continues after return to the DOE, the wage agarnishment will address the debt much quicker. If I decide to ride out my financial dilemma for a few more years and do not file BK 13, then the 15% wage garnishment will begin to pay these loans down. Other creditors/CA's/JDB's would have to get in line to get the other 10%.

A 15% wage garnishment on this loan pays the $100,000 + interest in approximately 15 years. My past plan would take another 28 years to pay off.

If the DOE does not continue the interest, then a 15% wage garnishment pays the $100K in about 9.1 years.

It is possible that the servicer will employ an outside CA prior to dumping the loans with the DOE. I would simply repeat my mantra to any CA, "I will not voluntarily pay these loans at this time. Either send them to DOE or change the BK codes."

In the end, from a purely financial point-of-view, it is better to default and demand the servicer immediately send the loan to DOE. I think some of you are correct. I have clearly stated that I will not repay this debt voluntarily. I have suggested to them that they get the process going that returns the loan to DOE and hurry up with the wage garnishment.

I'm not the only high-wage earner considering this approach. I've spoken with several high-wage folks who are deeply in debt with huge student loans. They have not declared BK and while their credit score takes a beating, they are at least paying down the SL's. Student loans are a very real glitch in the bankruptcy system for many people who cannot file a BK 7. At least with a BK 7 the process is completed quite rapidly, and the debtor can get after paying their student loans immediately.

[debtprison]

I thought Section 484A of the Higher Education Act eliminated the SL SOL?

[backtoschool]

I though there was a cap on student loan payments. If balance not paid off in 25 years, its forgiven with a 1099 form sent to you and IRS with remaining forgiven balance taxed. That is what I heard, unless it was a dream...-)

You have to be in an income contingent payment plan with Direct Loans, the gov't loan agency. Forgiveness does not happen through salary garnishment. The loans have to be consolidated with Direct loans and paid through the income contingent payment plan.