Advice About a Student Loan in Default

I recently purchased a business (last August 06) and had emergency surgery in November. I had complications until February of this year. In April, I was contacted by a collection agency regarding a defaulted student loan that I took out in 1980s. It was the first I had heard of it. Time has a way of veiling such things.

They said that I could make payments every month for 8-12 months and then reconsolidate. I have to have another surgery and am trying to save any money so that I can do so. Does anyone have any ideas?

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Valerie from Chico, CA

Answers:

Advice About a Student Loan in Default

First, all the bad news:
The government can seize any tax refund you may be anticipating, until your loan is out of default status.
The meter never stops running on a student loan, until its all paid off. There is no statute of limitations on a federal debt, so no one can wait for the debt to disappear, because it won't.
The interest accrues on the original amount borrowed, not the current amount. So if you borrowed $25,000, and have it paid down to $3000, you are being charged on the original $25,000.

I used to help people with student loans, but that was a few years ago, so some of my information may be outdated. Personally, if it were me, I would call the government to verify the debt, and then start working with the collection agency to get it paid back. Good or bad, the U.S. government has passed laws that ensure that student loans get paid back.

If you are in the position to settle, you may be able to ask for a lump sum settlement. They may be able to knock off 40-50 percent of the debt, if you can pay off the remaining amount in two or three payments. If you can't settle, then rehabilitation or consolidation may be the best options. (I can't remember the difference right now between the two programs.) Once you get your loan back in good standing, you may be able to qualify for a hardship program or a forbearance.

The main thing is:
Always talk to your lender, or the company that's managing the debt for them because the government will never forget that you owe them money.

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Good luck and hope this helps.
(08/24/2007)

By azDana

Advice About a Student Loan in Default

My first thought was why haven't you heard about this before now? Are you sure that you took out the loan and didn't repay it? I would ask them for proof (the promissory note) before I did anything unless you are sure you borrowed the money and didn't repay it.

Here is information about Student Loans:

studentaid.ed.gov

And here is information about defaulting on student loans:

ed.gov

and

ed.gov

You may be able to get some help with this especially, because right now you are having medical problems.

Take good care of yourself.
Susan
(08/24/2007)

By ThriftyFun

Advice About a Student Loan in Default

My daughter has a large student loan that she is unable to pay for the last few years, because she was taking care of me and my sick husband (now deceased). She was able to file for several deferments, called forbearance, each good for a year. The interest still accrues, but she is not "in default". You may be able to do the same. (08/24/2007)

By kathyka1302

Advice About a Student Loan in Default

If it was a government loan you had, then this may be a scam. The government would be coming after you if you really are in default, not a collection agency. If it was a private loan, there is a time limit beyond which collection agencies cannot come after you. Check to see what that is in your state. (08/24/2007)

By sheilamay

Advice About a Student Loan in Default

My daughter and son in law re-mortgaged their house, to include the student loans. Interest was less and they were able to spread out the amount owed over a longer time period. (08/27/2007)

Advice About a Student Loan in Default

Go to:

studentloanjustice.org. There are thousands of people who are getting taken advantage of by the student loan lenders. (01/18/2009)

By Nicholas V.

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