TG Rehab... $1000 minimum to rehab? I'm worried.

[Anonymous]

So I've just signed my husband up to rehab one of the student loans he defaulted on.  They required a "good faith" down payment of $238.  I made that thinking it would be the first payment... nope, now they want the $50 for the monthly amount before the end of this month.  Alright, we can swing it but what I'm worried about is his balance is only $1560.  If we make 9 payments that will leave us with barely $1110 left to pay.  I emailed their customer service department and they stated you need to have a minimum blance of $1000 in order for the loan to be repicked up.  You can't pay it off early or you'll forfeit the rehab.  I'm worried that if they don't get it sold to someone in the first month or so and we have to keep making payments they're just going to say "oopps, now your balance is too low and your rehab is declined." 

Has anyone had experience with this?

[blauthsp]

What ended up happening with this?

[scvbd99]

If it's a federal student loan, they are not allowed to ask you to make any type of down payment.  That's 100% illegal of them.  

You and they need to agree on a "fair and reasonable" payback amount per month for 9 months.  NO DOWN PAYMENT IS REQUIRED.  Call them and tell them that you will contact the Federal Ombudsman about their illegal demand, and that you want to pay XXXX dollars for 9 months in an official rehabilitation agreement.  They need to send you the terms of the agreement, including the amount you agree to pay per month for the 9 months, when it's due, and their process for finding a new source of funding for the loan when you finish your rehabilitation.

Sometimes it takes a couple extra months of payments for them to find a new lender to take over the loan, and that should also be in the rehabilitation contract you sign with them.  

If you can only afford $100/month for 9 months on a $5000 loan, that's usually considered "fair and reasonable" by the Federal Ombudsman.  If the peole currently holding your loan try strong-arming you for more, get the names of everybody you've spoken to, write an excellent and accurate summary of your discussion, and by all means, contact the federal ombudsman. The office of the federal ombudsman will usually call you within a few days.  

https://studentaid.ed.gov/repay-loans/disputes/prepare/contact-ombudsman

I rehabbed 17 separate loans for a total of $80,000, and my fair and reasonable payment for all of them was a total of $600/month for the rehab process.