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New Member
virtualoha
Posts: 2
Registered: ‎01-18-2012
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HELP: Private Student Loan Charge Off / Default (Sallie Mae)

[ Edited ]

I need help with how to proceed and what to expect in a charge off of a private Sallie Mae student loan.

 

Here are the particulars:

 

Collection Agency: NES of Ohio

Date of Referral: 11/06/2011

Date of Service: 10/01/2004

Amount: $35,000

Settlement Proposal: $17,500 (50%)

Original Loan Location: California

Current State of Residence: Illinois

 

Admittedly, I let this loan go without payment for 170 days due to financial difficulty. I found a doctoral program, paid by my employer, and strategized to contact Sallie Mae for an "In-School Deferment". Upon receiving the 10-day default notice in the mail from Sallie Mae, I immediately contacted them to let them know I was in school fulltime (the day I started and the first few days of that 10-day window). The guy was pretty cool, actually. He gave me a few options, and the one I took was a single $150 payment to give me a 30-day extension to get the paperwork to him. Well, I blew it and waited more than 30-days to get them the info, partially assuming my school would report my student status, and that by reporting to Sallie Mae, they would not take such swift action... maybe sending me another 10-day letter.

 

Sidenote: I received a 10-day letter from ACS (another student loan) last week and called them promptly to apply for the "in-school deferment". They immediately saw it on the computer and said it would be noted. I called again today to verify, and it seemed to not be, so I asked they absolutely confirm and send me a written notice. ACS student loan seems to be resolved, not the Sallie Mae / NES private student loan that his post is about.

 

Back to Sallie Mae (NES of Ohio). After calling ACS last week and seeing how easy it was, I called Sallie Mae to do the same thing (not knowing my account was a "charge off"). Sallie Mae spoke to me briefly and then connected me to NCS of Ohio. Quickly, I was speaking to the same company that I've been avoiding for 2 months. *remember this is last week* With a stern disposition, the person on the other end of the line informed me my account with Sallie Mae was "pre-legal", and I had two options: (1) Settle for 75% now ($26,250) or (2) Face legal action for the full amount + fees ($35,000) which will include wage garnishment. Feeling pressured and not wanting to face legal action, I kept speaking to them, giving them some financial information and holding fast on not having money to pay. They dropped the proposed settlement amount to 50% ($17,500). Still feeling pressured to decide that day, since hanging up would invoke legal action, I agreed to the settlement and gave NES bank account information for a 10% of settlement amount in two weeks to "show good faith" to Sallie Mae. In NES'  words and my mind, this would give me a least a week of purchased time to exhaust my resources to come up with the full $17,500. Well, that's not going to happen AT ALL, after talking to who I felt could help. Not to mention, I'm financially strapped in many other areas, including considering bankruptcy at this point ($36k in credit card debt / $875 in monthly payments) but still making all payments on time, except for student loans.

 

*sorry for the long story... just being complete*

 

I've vowed to always answer my phone now, as a personal commitment to facing my financial problems in the face. NO MORE IGNORING. Today, I reached out to a family member (lawyer) and a friend (works at law firm and husband is a lawyer) about the Sallie Mae matter and am considering calling a bankruptcy lawyer, too. While doing that research, NES called. I picked up the phone because on my list of things to do today was to touch base with a lawyer, then contact NES about not having the money for the 10% ($1750) "good faith" first payment. We don't have the resources to do it. The lady on the other line at NES, actually the second lady who stated she was a supervisor, laid into me a few times about not wanting to make the settlement and continually reaffirmed that legal proceedings would begin, if I don't take the settlement. Here's where I am now.

 

What to do? My wife and I talked to a second debt management company 2 days ago and could definitely get our credit cards on track by being a bit more frugal and entering into a debt management plan. That was the hope. BUT, we are now facing certain legal action for $35,000 + fees from Sallie Mae / NES. Bankruptcy seems like our only option to cover the credit card debt, if my wages are going to be garnished. What would you do?

 

Income: $81k + $5k consulting / year

Family: Happily Married + 4 children

House: Currenly leasing for 1.5 more years (never owned a home)

Work: Graduate Professor + Homemaker (wife)

 

Thank you SO much, in advance... I feel miserably stuck with no real, solid advice or answers.

New Member
watsont5
Posts: 3
Registered: ‎01-18-2012
0

Re: HELP: Private Student Loan Charge Off / Default (Sallie Mae)

why dont you just do the loan rehabilition program on that loan.

New Member
virtualoha
Posts: 2
Registered: ‎01-18-2012
0

Re: HELP: Private Student Loan Charge Off / Default (Sallie Mae)

I would IMMEDIATELY do a student loan rehab, if it was available for private student loans. Can anyone confirm if this is an option? If so, how can we immediately proceed? If not, any other advice?
Valued Contributor
IOBA
Posts: 2,697
Registered: ‎08-13-2009
0

Re: HELP: Private Student Loan Charge Off / Default (Sallie Mae)

Call Sallie Mae and ask them about doing a loan rehab.   If they direct to the CA, then ask the CA for a loan rehab.   

 

Let the CA know it's the best of both worlds - you have pymts you can afford AND they get all the money they were instead of settling.

Established Contributor
dharalex
Posts: 607
Registered: ‎09-08-2011
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Re: HELP: Private Student Loan Charge Off / Default (Sallie Mae)

I'm not suggesting you not pay, but don't get too nervous about garnishment...yet! You cannot get garnished until you are served and a judgment is granted. You have at least 30 days to respond when you are served. If you are that strapped for cash, they will likely hold off on litigation. I'm not saying it won't happen, I'm just saying I wouldn't file for bankruptcy until I absolutely had to. With this being said, SL must be paid! There is no SOL, and they will destroy your credit. So I would send them ANYTHING until you can either get something you can agree with, you become more stable, or the worse case, you get sued. I'm certain your attorney friend will be a great source for you. From experience, any activity shows you aren't ignoring them. They want their money, so it's not likely that they will just accept whatever you offer especially since you are considered high risk. But it costs money to sue, and a judgment is easy, but collection of it can be difficult. Stop giving financial information! Some folks are ruthless, and if they take more than you verbally authorized, the burden of proof is on you. Sorry to rant....I feel your pain because I've been there. Just continue to pay as much as you possibly can...they will accept it. And keep a log of what you send. I personally would send a check as well, but that's just me. I wish you all the luck...


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Regular Contributor
boonelb
Posts: 146
Registered: ‎01-24-2012
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Re: HELP: Private Student Loan Charge Off / Default (Sallie Mae)

not true I had been garnished without being served in TX.  Govt debt is one of the few things that could be garnished there.  Absolutely make contact with the agency and work soemthing out. if you make voluntary payment then they cant garnish you.  also if you cant pay they have an income based repayment plan. 

Established Contributor
dharalex
Posts: 607
Registered: ‎09-08-2011
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Re: HELP: Private Student Loan Charge Off / Default (Sallie Mae)

I'm sure you will do your own research, but the definition of garnishment is the collecting of a monetary judgment against a defendant. Maybe you weren't served, but I assure you in most cases, with the exception of collection of taxes, a judgment must be served first. Within the judgment is the garnishment outlining how it is to be paid. Im sure there are other extenuating circumstances, but from my research and experience, this is what I know to be true. In the case of taxes, they can keep any tax refund even without written or verbal notification....at least in the state of Missouri...wink, wink. Again, good luck.


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nelcida23
Posts: 6
Registered: ‎01-17-2013
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Re: HELP: Private Student Loan Charge Off / Default (Sallie Mae)

im a similar situation as you with this people. what ended up happening? did they let you makie the payments or did they try to garnish your wages?

Regular Contributor
mmmlive1999
Posts: 149
Registered: ‎12-18-2012
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Re: HELP: Private Student Loan Charge Off / Default (Sallie Mae)

[ Edited ]

boonelb wrote:

not true I had been garnished without being served in TX.  Govt debt is one of the few things that could be garnished there.  Absolutely make contact with the agency and work soemthing out. if you make voluntary payment then they cant garnish you.  also if you cant pay they have an income based repayment plan. 


+1 The Govt can garnish without going to court first in all states for student loans!

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New Member
collectiontruth
Posts: 2
Registered: ‎01-20-2013
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Re: HELP: Private Student Loan Charge Off / Default (Sallie Mae)

[ Edited ]

Hello, I am actually a veteran of the collections industry. I actually specialize in student loan debt. I am not trying to be rude, but the reality of the situation is the information currently being given is incorrect. Private Student loans, unlikely federal loans (Direct Loans), can not be rehabilitated, or qualify for any of those federal programs. This is a common misgnomer, as many people are not given proper information prior to signing these loans. Your loan is currently in default, there is no forbearance or deferement programs. You can not consilidate this loan, Sallie Mae does not work with debt consolidation companies. Most attorneys are ill-equipped to handle these loans, and basically do nothing with them, take your money and leave. When you originally signed up for you loan, you and your potential co-signer came into an agreement that you would make whatever said monthly payment is, think of it like a mortgage payment. There is a logical legitimacy to how aggressive these particular loans are. You borrowed money from a private bank, who is responsible to its share holders. Compare that to the soaring national debt, and you can see why leniency is not an option. 

 

Now that you are in default and have a collection agency assigned to you, there is no circumeventing this particular agency. If you call Sallie Mae, they will immediately transfer you to your assigned collection agency, in this case NES. Attempting to avoid them will only bring about more annoyance. Settling as soon as possible is in your best, long term financial interest. Simply, based on how the numbers work out. As you seem to already know, you can not file bankruptcy on this loan. If you do file bankruptcyit will simply gain interest until discharged. Now that you have defaulted you are on a variable interest rate. From what I have seen Sallie Mae uses particularly high interest rates anywhere from 6-17%. This interest is also applied and recalculated daily, far more aggressive than the monthly APRs you come accross with like credit cards. 

 

This loan will be in default until the balance or the settlement is paid on the loan. So as an example let say your current interest rate on you loan is 8%. A simply way to calculate the interest on this loan principal*interest/365 and that will be roughly how much you are accruing in interest each day. So approximately 6.5 a day, normaly I would recommend tacking on an extra 1 dollar simply because the interest rate is variable (adjusted each month). Also from my experience, I can not see any particular pattern to how they adjust the interest rates. I almost swear they pull the numbers out of a hat. But for this example we won't; so approximately 6.50 a day in interest, multiply that by 30 equates to around  a month in 195. Your nomal student loan payment was probably somewhere between 165-300 depending on if you had an extended agreement with Sallie Mae, but even if you loan was at the top end of the payment program (1%), you would only be applying 105 dollars a month to the principal balance of the loan, if you were to pay that much to the collection agency. So you would be making payments to this agency for approximately 20 years, if Sallie Mae decides to leave the loan with the agency, which is rare. During that entire time, the loan will sit in default. So for 20 years, you will pay more on other potential loans and lines of credit and you definitely can not buy a house, all because this is on your credit. On top of that, during that time you will pay Sallie Mae an additional, $46, 000. So a total of 76,000 on a loan that was probably only 23, 000 when you took it out. It will simply hurt your credit, during that time and to make matters work, the student loan interest can not, be used as a tax write off when the loan is in default. Let's say you decided to pay 200 dollars more than that, 500 bucks, you could have this paid of it approximately 7 years.

 

The collector offered you a 50% settlement this is a good deal, especially seeing as most of the creditors I work for usually only accept 60-90%. Since it is a guaranteed debt (can't be bankrupted), you almost never see settlements like you would see for credit cards. Simply put, there is no escape route and they know it so they don't have to bend over to work with you. 

 

Solutions

 

The best solution to be honest is to settle, while it does not seem you are in the position to do so and I do not know you full financial history, here are some options. The best options to get rid of these loans if you have a stable job and have been contributing to a 401K; is to do a 401K loan. You need to have contributed double of what you are trying to borrow, so approximately 30K. Normal 401K loans are usually around 4 years. They often have amazing interest rates somewhere between 1-4%. Plus all the interest is paid into your 401K. So your 30K guaranteed debt becomes a 15K debt at approximately 340/mo for only 4 years. Plus you get this off your credit. 

 

Second best, solution is to simply try to get a signature/title loan from a bank. Most major banks will not work with you, but if you can find a credit union; they will be a lot more receptive. You will probably be looking at a similar situation as the 401K loan in terms of terms, but your monthly payment will likely be a bit higher 375-400 bucks, and the bank gets all the interest, of course. 

 

If you can only make payments they will accept payments, if you are stern on the fact that you can only make payments. It may potentially take awhile, but they will let you. I wouldn't recommend it, as it is easy to go on about your day let them auto debit your account, and forget about it until you are attempting to make a major credit purchase. I can't count the number of dreams of home owning, I have seened ruined because of student loans. You can settle at any time, and it will be a percentage of what you currently owe. So they more you pay the better off you will be in the long run. 

 

While I understand it is frustrating, you need to frame your situation logically. On your credit or at least soon to be it will be reported that you owe 30K. The more you pay the better off you will be in the end. If you can settle, settle. You do not won't to have a decade plus, stint of your credit hanging in the balance and working with a collection agency. This debt is not owned by the agency most likely, so you leave yourself open to Sallie Mae taking the loan and suing you anyway. Which they are within their rights to do. Now that you are defaulted and in collections you are not guaranteed much in terms of "protections" from being sued for tha balance. 

 

So in short, be aggressive in ridding yourself of this loan. While you may see it as the bill collector as being "greedy" it has nothing to do with his greed. It is simply the bank playing on many Americans natural reaction to pay the minimum and gouge your for every dime and ruin your credit. 


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