Help, what options do I have with money owed to Cal State University

[smkkms78]

Hi Everyone,

    I am trying to buy my first home and was just hit with another roadblock.  My credit score just dropped nearly 100 points for a collection that was just added from 2007. It is a collection for $3660 from Cal State University. Desperate, I called the collection agency (Conserve), they won't give me info over the phone, said I had to submit a request in writing that would take 30 days to respond. (I don't have 30 days, I am to close in 3 weeks.) I called the University and they advised what the fee is (a return of financial aid). I had no idea I owed it to the school, thought it was a part of my student loan that I am in the process of making my payments on. The school was very nice, but since it went to collections they are not sure what they can do. They will try to have someone call me back on Monday, but I am beyond stressed. I do not have the $3660 to PIF, but I believe I do actually owe it. My lender said my loan is a go, contigent on this $3660 being settled.  Does anyone have experience with this sort of situation? Monday, I am going to ask the school if I can pay them back directly, maybe half now and payments for the rest? I am doubtful though since they say they have written it off...

   Also, I am told that collections from Universities are not like other collections. My understanding is that the debt is not actually bought by the collection agency for educational institutions and the money is still owed to the university.  Any experience with debt collections for education?

I hope someone can help at least make me feel better?!

[Anonymous]

What type of loan are you doing?  Some loan programs allow for seller consessions to pay these types of debts for borrowers, if there is room in the appraised value and the borrower qualifies at the higher loan amount.

[smkkms78]

Hi, It's a FHA loan. And the lender is requiring this be "settled" as a condition of giving me the loan. The home is a short sale and over the last several months I have been through many ups and downs with this purchase. I am finally at the end and now this collection might be what prevents me from getting the home! I'm frusturated and upset with myself and really don't want to lose this house. I need to find whatever option keeps me the loan! 

[Anonymous]

My first suggestion would be to get ahold of the collection company at see if they will settle for less.  I would get with your loan officer to see if they can structure that amount to be paid at closing by the seller. It may be a challenge as some short sale lenders are harder to work with than others. Some facilitators on short sales are better to work with than others also.