Re rehabing a defaulted student loan.

[Anonymous]

Ok so my sister defaulted on a student loan. Apparently she has already tried to rehab it and wasn't able to finish the program. So now the collection agency want's 18,000 all at once or their going to garnish her tax returns and  pay check. They won't take any kind of monthly payment plan. She's a single mother doing it all on her own with no child support and no help from the government. Is there any other way to fix this or is she just supposed to let them garnish her pay? I know you can only rehab a student loan once but is there anyway other way fix this?

[Tazman81]

Hi Cara:

Is this the same loan that was in the posting:  http://ficoforums.myfico.com/t5/Student-Loans/Trying-to-set-up-payment-on-defaulted-student-loan/td-... ?

Well, here are my thoughts on this particular situation.

#1:  Your sister needs to go to court, get a child support order and get that order enforced immediately!

#2:  At this point, the CA is perfectly within rights to request the full amount up front.  It sounds like they tried to work with her once with respect to the rehabilitation but then that fell through.  Unfortunately I haven't heard of anyone getting a second chance on this.  With respect to payments, how much were the original payments and how much does your sister want to pay?  At this point, the payments need to be of an amount that would pay this debt back within a reasonable amount of time.  If this was a federal loan, then yes, they likely will take the federal tax return (or a portion of it) in order to ofset it.  As far as wage garnishment, to my knowledge, they would need to get a judgement against her for the debt prior to being able to garnish her wages.  Each state has a different percentage of wages that can be garnished.

I guess another option may be for her to call the original creditor or maybe the guarantor company to see if they are willing to work with her directly and take this loan back from the Collection Agency.  She can explain the situation and hopefully someone there will be able to help.