Unsure of next steps - pls help

OK...for starters these are my initial questions.

What was the name of the school??
Who was the original lender?
What was the withdrawal policy of the school for refunds?? In a lot of cases a month into the school year you would not be eligible for much (if any) of a refund. Also in most cases, withdrawal officially has to be done in writing on their form.


You borrowed the in 91 but you say in 94-95 you sent $4000 to the original lender?? By then, the loan would have already been in default and paid off by the guarantor. If your loan was a FFELP loan, it could have changed hands many times by then. There is a very good possiblity that your $4000 in money orders where held or forwarded to someone else. There is also a possiblity that they were never cashed.


You can always log into NSLDS to check on some of info on the loans.

http://www.nslds.ed.gov/nslds_SA/

thanks for your response, soaplady... apparently I did not withdraw properly... so it looks like I won't be able to claim "non refund from withdrawal". the bigger issue is the fact that I have no proof whatsoever that I paid $4,000 over 10 years ago... the money orders WERE cashed, but OF COURSE I don't have the payment receipt that was sent to me, no money order stubs, and I can't even remember for sure which entity I sent the payment to (again, it was a blurry, transient time in my life over 10 years ago).

I am supposed to get back in touch with the CA to address this now-$16,000 debt (asked them for a little while to try to locate payment proof, etc.). Do I have any leg to stand on? anyone I can appeal to? I mean, due to the fact that this debt has never been reported to credit bureau until now... and that this is the first time they have ever called me about this... I need some suggestions as far as negotiating my situation, if possible. Should I be going straight to DOE at this point to explain my situation, appeal and/or negotiate? or am I better of communicating with this CA? not only do I absolutely not feel liable for $16,000 - but even having to pay the original loan amount would make me sick to my stomach (at most, I should be liable for $2,500 from not withdrawing from school properly)... what is my next move - can a lawyer help me at all?

This student loan stuff happens more than you think. It happened to my sister (whos 43 and been out of college for ever, and paid her loans off forever ago).

(not the most useful post... but i know what you're going thru)

[quote]thanks for your response, soaplady... apparently I did not withdraw properly... so it looks like I won't be able to claim "non refund from withdrawal". the bigger issue is the fact that I have no proof whatsoever that I paid $4,000 over 10 years ago... the money orders WERE cashed, but OF COURSE I don't have the payment receipt that was sent to me, no money order stubs, and I can't even remember for sure which entity I sent the payment to (again, it was a blurry, transient time in my life over 10 years ago).

How do you know the money orders where cashed? Did you order a copy of the money order with front and back showing endorsement? That is the problem with money orders...you have to order and most times pay for a copy of the cashed MO.

I am supposed to get back in touch with the CA to address this now-$16,000 debt (asked them for a little while to try to locate payment proof, etc.). Do I have any leg to stand on? anyone I can appeal to? I mean, due to the fact that this debt has never been reported to credit bureau until now... and that this is the first time they have ever called me about this... I need some suggestions as far as negotiating my situation, if possible. Should I be going straight to DOE at this point to explain my situation, appeal and/or negotiate? or am I better of communicating with this CA? not only do I absolutely not feel liable for $16,000 - but even having to pay the original loan amount would make me sick to my stomach (at most, I should be liable for $2,500 from not withdrawing from school properly)... what is my next move - can a lawyer help me at all? [/quote]

You are basically SOL. Without any proof they are not going to budge. The fact that you don't even know exactly who you sent it to or exactly when isnt going to fly. The funds where borrowed in 91...the loan became due 6 months after you withdrew, so early 92. You would have defaulted probably by June of 92 and your guarantor would have paid the claim. You sent the lender $4k in 94....by then you would have had 2-3 years of accrued interest and collection fees assessed. After 3 years in default you would be looking at approx $1500 in interest and another $1500 in collection fees. Actually I just did some math on an interest calculator...your interest rate in 91 was approx 7%. 15 years of interest calculates at over $11400. Plus principal and collection fees. By my calculations it is possible that somewhere along the line, the $4k just might have been applied to your account. My point is, no one is going to let you appeal without proof. It sounds like your account has recently been subrogated from the original FFELP lender by the DOE. It is possible to negotiate with the CA to have the collection fees waived if you pay them off in a lump sum as a settlement. An attorney can do nothing for you except take your money. This is an unfortunate situation but it sounds like somewhere you dropped the ball.

hi soaplady... well, here's where i'm at: because I can not produce evidence of my payment (and by the way, I know the money orders were cashed because I had an actual payment receipt/letter in hand at one point!) the CA is offering either a settlement or suggesting loan rehab. I was not ready to extend an offer during our last convo since I was overwhelmed at the time... I asked what he thought was reasonable and he came up with $11,000.... I then hemmed and hawed, saying how I can't believe this is happening to me, etc. - he did seem to sympathize with me... mentioned that he appreciates how responsive I've been since they initially contacted me, etc. - I told him I just didn't know what to do. He then recommended I fill out some kind of financial statement so we can figure out what might be the best course of action... as difficult as it is to even think about, I have $5,000 maximum that I can put toward a lump sum settlement right now. I'm assuming that his initial figure of $11,000 was probably a high-ball number, but what am I supposed to do? Is loan rehab the way to go? or does that basically mean I will be paying the entire $16,000+ balance over 20-30 years??? I'm absolutely sick to my stomach (sorry for the drama : /) I asked the CA if I should go to the DOE to appeal... he said that w/o proof of payment, they will just say i'm liable for the full amount and they will not work with me on a settlement amount at all.. is that true? How much leeway does the CA really have in negotiating a settlement amount on a 15-yr old loan?? If I have no choice but to bite the bullet here, I need to know how to get them to accept the lowest amount as a settlement... I just can't see myself rehabing this loan and paying out $16,000!!!! Good grief...

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Thanks for your feedback, soaplady... last question (for now!) - i'm in my mid 30's and have something like $30,000 built up in my social security account thus far (if I recall correctly from my last Social Secuirity benefits report). Is there any way I can defer some/all future social security benefits toward this student loan debt? I mean, if they actively garnish social security payments, why wouldn't they accept a proactive offer of guaranteed future SS benefits?

Hi big-sigh.....I just wanted to let you know that a lot of this kind of stuff goes on all the time. Gee whiz I had so many poeple calling me it was ridiculous, and I am in my 50's and owe much more than what you are facing. I just wanted to let you know that you are not alone. I just hope that this really is a legitimate issue and not a rip off! But then again I have become very cynical and untrusting of all CA'S!
I myself am going through this organization before I make any decisions or sign anymore promissary notes that I don't completely understand. Good luck and God Bless!
http://www.naca.net/find-consumer-protection-attorneys/

thanks for your kind words, Moon...

Soaplady, last question! Isn't it in the best interest of the CA's commission to tell me that "only the CA can negotiate a settlement - the DOE will not/can not". Is it worth a try to appeal my situation directly to the DOE with hopes of receiving a lower settlement amount? It just seems to me that going through the CA should always prove to be more "expensive" than dealing with the actual debt holder.

bigsigh, really hope all this works out for you. Sounds like a big ugly surprise. goodluck with all this.

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thx fedupinpa... I appreciate your well-wishes.

and thank you, soaplady, for your input... there is no sign of any payments made on any/all of my outstanding loans - not even a federal offset that I think the CA initially mentioned he saw on my file.

they have not yet contacted my HR department, probably because I have been repsonsive and even pro-active with the CA since this ordeal began in January... I now have to face the music and either proceed with a rehab plan or accept whatever settlement offer I am able to get them to consider.... I think I may try to call DOE as a last-ditch effort - maybe try to get a more senior person on the phone who might have more leeway to consider a lower settlement amount... the worst that can happen is they say "sorry, you're SOL, deal with the CA".

thanks again for all your help and support - perhaps i'll report back with the outcome.

Soaplady, please give me your final input on this:

Debt: Principal=6k -- Interest=6k -- Penalties=3k

The CA is offering two options. 1.) A compromise equal to principal + 1/2 interest (9k total which I would need to pay in full within 90 days) or 2.) Rehab.

The CA explains rehab like this... I would need to make 9 monthly payments (said 1.3% of total balance=1 payment) on time. Once I do this, my loan is out of default and they will eliminate the penalties. I then can pay much lower monthly installments over a much longer duration of time to satisfy the remaining balance (which after my 9th payment, less the penalties, would come to $10,245 if my math is correct).

I'm trying to understand what exactly the benefit would be in accepting a compromise... doesn't appear to be any (plus, paying out $9k net over the next 90 days would be an economic hardship). If I go with compromise, I need to pay out $9k over 90 days. If I go with rehab, I need to pay out $11k-ish(?), but will have years, not 3 months! to satisfy the obligation... is that right? And then what are the tax implications for either scenario? I'd really appreciate some "if you were in my shoes right now what would you do" insight... I'm just so dejected from all this that my brain is having a hard time figuring out the most economically advantageous option here.... the absolute most I can put toward either of these options to start is $4,500 (although with rehab, there wouldnt be a lump sum initial outlay, right? it's just 9 monthly installments to get the ball rolling?) After lurking on these forums, I feel I should know better : / i'm sorry, i'm just... baffled and overwhelmed.

There are tax implications if you take the settlemnt...you will receive a 1099 on whatever balance is waived.
When you rehab, the 9 months of payments to qualify is part of a 120 month or 10 year loan. Collection fees are waived and there is no tax implication...it is just part of the DOE rehab program. So unless you can come up with an interest free loan to settle, the rehab would be a better choice. You still have the option to consolidate your loan after the rehab has completely been completed.

Soaplady, you've mentioned a number of times on these boards that there is a tax implication when settling a student loan. I just brought this up with both my CA and then the DOE - they both claim that there would be no 1099 issued on a federal loan. So, now I'm a little confused... I am still in the decision-process for choosing either a compromise or rehab... my CA is telling me that I would need to make a down payment of 1/3 the total debt minus penalties to start the rehab process..... is this right?! Is that a CA policy, or is that standard op. procedure by the DOE to require a 1/3 down payment prior to beginning my 9 monthly payments??

Soaplady, please help me calculate which option is the most economically efficient! I'm like a deer in the headlights, not knowing how to calculate what my total pay-out would be with rehab VS. settlement. Settlement seems to make a HECK of a lot more sense if there is, in fact, no tax implication... but now that I am hearing conflicting reports, i'm at a loss...

No downpayment is required to enter into a rehab program. They can ask for it but they cannot make it a condition of rehab.

As for the 1099, I will need to look up the law. But they most definately do send a 1099 when loans are settled over $600. The CA doesnt have involvement in it...the guarantor does, as they are writing off a loss. I will look it up later and get back to you.

Soaplady, have you heard anything more regarding whether a 1099 is issued for a federal loan settlement or not? Maybe I should call DOE one more time and have a different person confirm this.... it is a huge factor in whether I take the settlement offer or not.

I still believe that my CA has more room to maneuver... if he's trying to tell me I need to plunk down 1/3 of my balance to start rehab, who knows how much more leeway he has in bringing the settlement amount down... besides, I trust the CA will get a larger/more immediate commission with a settlement than if I went the route of "non-lump-sum-up-front" rehab - can't wait to hear what he says when I call him on this (he was pretty adamant about an up-front lump sum payment for rehab).

big-sigh....when dealing with this CA I would suggest recording all of his offers and promises. here is a link to a few sites that will let you know the laws concerning recording calls in your state.

http://www.debtconsolidationcare.com/settlement/phonecall-laws.html

I realize...that these forms are very difficult to understand...but as we are experiencing some technical difficulties here at the site....I thought I would at least give you something to look up and study until soaplady can better explain.

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thank you very much Moon! I did come across that Carreon and Associates article myself - still unsure which way to go, but your help means a lot to me.