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When a Student Loan Goes SourMay 25 '01 (Updated Feb 23 '05) Write an essay on this topic.The Bottom Line Avoid having wages garnished! Avoid Charge Off Fees! Hopefully I am not sharing the same experiences and situations, I am here to warn of the storm that can cloud your skies when a student loan goes delinquent. It is hard to come here and say that I am irresponsible and admit some of my major life mistakes but hopefully this will help you not dig the same hole I have. -my brief college experience: I went to college in 1996, Indiana University of PA, I was there for one semester. I received two student loans to pay for everything, housing, meal plan, tuition, and even books. My parents were unable to help me at the time, which in a way was a good thing. In the fall of 1996, I was excited and on my own, five hours away from home, I loved it. About three weeks into classes, I go off track. I stop attending classes, I work two jobs, and I spend every spare minute at the computer lab on a chat room. I have a strong feeling at the end of the semester I will be asked to leave or lose my loan privileges so I withdrawal. Five years later, I still have two student loans, and the depressing thing to admit is there has only been one payment towards the both of them. -the loans My student loans were through PHEAA, Pennsylvania Higher Education Association. Less than a year ago PHEAA sent one of the loans to an outside collection agency, NCO. I had asked for a forbearance (which is a one time deferment) and I had also asked for a unemployed deferment (but never finished filling out the paperwork.) I did defer the loan payments when I had went back to school in 1998 but due to my financial situation and performance in 1996 I could not stay at school longer than a month. -So what happens when a student loan is delinquent as long as mine has been? PHEAA is the shy person who never sticks up for themselves by asking or demanding their rightfully owed money. I never hear from PHEAA, a letter and maybe a phone call here and there. BUT they will take away your chance of getting another student loan if your previous is delinquent. NCO PHEAA Division will rarely send you a letter but will call you at home and at work. an Outside collection agency can also add a charge off fee (which is some cases in 35%) let's say one student loan is 4,000 when it is sent to an outside collection agency it can jump to 5,400. plus the collection agency wants the payment if full, although some payment arrangements can be made. For both of my loans with PHEAA and with NCO: I lose my income tax return. Anything that I would receive back for taxes is sent to PHEAA and to NCO. Some people have stated that you can get the income tax back if you make arrangements and keep them. Unfortunately I do not believe this is so. Here is the best incentive to not have a delinquent loan. Garnished Wages. I am now at the stage where my wages can be garnished. I had asked PHEAA how much they would take from my paycheck and they had stated 25% gross pay. When I asked NCO another charge off fee came to haunt me. NCO would add 35% of the balance and then garnish 25% of gross wages. Again if my original balance was 4,000 then jumped to 5,400 for being sent to NCO, it will now jump to 7,290. (I am not figuring in the interest.) -To avoid this: Try to make the minimum payment, once it starts to get delinquent the minimum will go up. My minimum was estimated $53. Now the minimum I can pay with PHEAA is $75 monthly and wit NCO $200 monthly and that is on their rehab program. If you can not send the minimum payment send what you can, it is better to at least show that you are trying, plus it will lower what they will add to the next payment. Deferments: If you are unemployed ask for the paperwork to apply for the unemployment deferment. What they want you to do is write down the places you have applied to recently. It is much better than using the one time forbearance. Use your forbearance wisely, if there is something else you can due to get an extension go that route. If you go back to school, find out what the requirements are that will defer your previous loan, such as do I need to be a full time student? If you are filing bankruptcy you can not file a student loan, unless it is a hardship to pay it back. So if you are filing bankruptcy ask your lawyer about the student loans, it may mean that you will have to go to court twice to file the student loan. I learned of this on the Internet and I wish I could remember the site, if I find it again I will add the site to this opinion. I of course never spoke of credit rating, a delinquent loan which is in the thousands, has a lower interest rate and low payments each month really does not help you get any type of future loan. Let's just say I could not get a loan for three hundred dollars. Update: January 2004: Last year I tried to go back to college. I needed to take out another student loan but because of my previous student loan being delinquent I could not even qualify for grants. I called the collection agency my student loan was collecting dust at and asked them what I could do to be able to borrow again. The Game plan was Loan Rehabilitation. I am sure it would be different for everyone, but for me it went like this; a down payment of $100. And then 14 months of $120. When I reached the ninth month of $120 I recieved a contract to sign. Currently I am on the tenth payment. WHat happens next is what the collection agency told me. Once I finished the rehabitation my loan will be sent back to PHEAA (pennsylvania Higher education association),, I will be able to borrow again and my credit report will get a thumbs up. Hopefully everything will go as planned, I'll update on 14th month. Update August 27th: I start school August 30th. I was able to get a subsidized and unsubsized loan. I still need to make up the credits that my original grant paid for. Which I am not eligible for that grant this fall semester. It has taken me eight years to go back to school. Do not think you can not do as I did. I might have freshmen asking me to buy them beer(I am 27 years old), but hey I am going to college!!! Update: I am a freshmen on my second semester. I have loans and grants. I made Dean's List and hope to continue making Dean's List. Sometimes I worry about the loans I am accumalating, but education is important to me. I try my best to warn others of the dangers of not paying back student loans. I wish all college students the best and have deep respect for those who have children or a full time job or both and are going back to school. You can turn a sour loan into something that will help you educate yourself or improve your credit rating. Communicate with the company that gave you the loan explain your situation and see if they can work with you, an extra 15 minutes on the phone can be productive. Best luck to all students and parents.  |
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