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Can Dept of Ed Deny rehab on eligible defaulted loan?

New Member

Can Dept of Ed Deny rehab on eligible defaulted loan?

Hi All-

 

I will try to make this short.  Back in February I received a letter from DOE about a 14 year old defaulted Perkins loan in the amount of $2,000.  After interest the current amount is $3,190.  I called to ask about loan rehab and was told to send in my financial disclosures.  I did and was offered a monthly plan of $404.  This monthly would pay off the balance BEFORE 9 months and thereby not hit the rehab stage.  I called back (and sent a letter) asking for a more reasonable $200 monthly payment.  They essentially told me that it was still in review, but that the decision was solely based on income and that it likely wouldn't go down.  Im unsure on what to do...can they essentially deny you the loan rehab option in this way just because of your income?  I would like to receive the credit benefits of rehabilitaiton.  

 

Thanks for any insight!

Message 1 of 9
8 REPLIES
Senior Contributor

Re: Can Dept of Ed Deny rehab on eligible defaulted loan?

This will probably sound harsh, but it's not meant to be:

 

Perkins loans are subsidized meaning you don't pay the full cost in interest, etc. In addition, they tend to be used more for "technical" professions and are eligible for "work payoff credit" for public service vocations. Considering the loan is 14 years old, started at $2000 and today is only $3100 I'd suggest you make your best deal as far as payments and get busy paying it off. 

 

I understand budgets and cash flow and all that, but it's been neglected for fourteen years and your unpaid "interest build up" is only $1100, I know a lot of folks that would love to have that deal. It would have been long paid off had you gone into public service but I understand that's not for everyone, but still, you could have paid $20 a month for the last 168 months and it would have been paid in full.

 

Talk to them, make a deal, take the deal and keep your part of the bargain.

 

Just so you don't think I'm just dumping on you, I got hit by an IRS audit that went back 10 years. The IRS claimed I owed $200,000 in back taxes, I claimed I didn't owe them a penny, but I couldn't produce records that went back 10 years, just the last 4 or 5. The IRS can take your home, they can sell your cars and to prove otherwise you can spend tens of thousands on legal fees. We settled with an "Offer In Compromise" for probably what I would have spent in legal fees, but I had to send them more money than I could afford for 16 straight months all for something I did NOT owe.

 

Once paid, it's over, done, gone, forgotten (well not by me as far as the IRS) - IMO after 14 years,  it's time for you to take care of this issue not bargain for even more time - how "rehab" would affect your credit scores is not really a concern at this point IMO.   

Message 2 of 9
New Member

Re: Can Dept of Ed Deny rehab on eligible defaulted loan?

Thanks for the response but that doesn’t really answer the question at all. Also, I was unaware the loan even existed and had not received a single piece of correspondence on it before February so I was not neglecting it.

The question is, since the loan has not be rehabbed before, shouldn’t the DOE allow me to make 9 payments in order to hit rehabilitation per the federal rehabilitation guidelines.
Message 3 of 9
Senior Contributor

Re: Can Dept of Ed Deny rehab on eligible defaulted loan?


@CreditEnthusiast2 wrote:
Thanks for the response but that doesn’t really answer the question at all. Also, I was unaware the loan even existed and had not received a single piece of correspondence on it before February so I was not neglecting it.

The question is, since the loan has not be rehabbed before, shouldn’t the DOE allow me to make 9 payments in order to hit rehabilitation per the federal rehabilitation guidelines.

Considering there have been no payments in 14 years I would think any option to "rehab" has long expired. Perkins loans have to be specifically applied for since they are designed for low income (its the primary purpose) students which is also why they are subsidized, they are also capped (I think its $27k, but I'd have to check). Someone applied and was granted approval for the loan, I don't think "not being aware of it" is going to fly with DOE. Although you say you were unaware of the loan, you did not say it was not a valid debt.  

 

I work with the appropriators of federal spending (not directly within the committee but with the lawmakers), every year there is pressure to fully fund Perkin loans and every year there is a discussion about discontinuing the taxpayer-subsidized program since private and federally backed student loans are universally available along with Pell grants. Most students graduating today with a BA/BS deal with $40k to $75k in student loans, going for a Masters (MBA, JD, etc) and they are looking at $150k plus. You are looking to clean up a $2000 "specialty loan" designed and taxpayer subsidized for low-income students (with interest $3100) that has been sitting there for 14 years.

 

I can't speak for the department of education as far as policy, but IMO based on simple ethics, I think you are pushing the "goodwill"  deferment more than a little especially since DOE has deemed your income high enough to pay $404 a month (I'm not trying to be combative).  

 

https://www2.ed.gov/programs/fpl/index.html

Message 4 of 9
New Member

Re: Can Dept of Ed Deny rehab on eligible defaulted loan?

Again, I've recieved nothing to verify that this debt is valid - I've had a clean file for 20 years.  Im not looking to duck and dodge responsibilities, but DoE does not appear to be following the guidelines that are in place even if the debt were mine.

 

So ethics aside, I'm actually looking for the official policy on rehabilitation.  Thanks again for your comments! Smiley Happy

 

 

Message 5 of 9
Contributor

Re: Can Dept of Ed Deny rehab on eligible defaulted loan?

Yes, you should be able to rehabilitate this loan if you have not already done so. As for the minimum payments paying off the loan in under 9 months, I know the question has been asked a lot on these boards so I'd do a search and see what you find. I do believe I've read where people have been able to make arrangements to pay less over the nine months so don't take an initial no for an answer. Escalate your request. 

 

This is a government website that entails how to go through the rehab program and even mentions Perkins loans. If you click through they give you a way to check your who your Perkins loan servicer is (the school it originated from or the government). 

 

https://studentaid.ed.gov/sa/repay-loans/default/get-out

 

Good luck. 

Message 6 of 9
Senior Contributor

Re: Can Dept of Ed Deny rehab on eligible defaulted loan?

Update on the Perkins program: After checking at the office today, it seems the Perkins program was allowed by the Senate to expire at the end of FY17 as it was not reauthorized (funded) in the FY18 Omnibus. It is possible this program will be reinstated, but for now, DOE and the schools that managed these loans are closing out the program - which may explain why they are "demanding" payment of past obligations. 

 

As far as validating the debt, Perkin loans require the student to acknowledge and agree to the terms - it's pretty simple to request a copy of your loan documents which should include a signature on the dotted line. 

Message 7 of 9
Regular Contributor

Re: Can Dept of Ed Deny rehab on eligible defaulted loan?


@CreditEnthusiast2 wrote:
Thanks for the response but that doesn’t really answer the question at all. Also, I was unaware the loan even existed and had not received a single piece of correspondence on it before February so I was not neglecting it.

The question is, since the loan has not be rehabbed before, shouldn’t the DOE allow me to make 9 payments in order to hit rehabilitation per the federal rehabilitation guidelines.

The NSLDS has all government backed loans which includes Perkins. It even shows the grants you recieved.

https://www.nslds.ed.gov/

 

If I were you I would check this. If there is a 14 year old loan, maybe there is a 15 year old one too.




Stickin' together like flour and water to make that Sloedough. We worked for everything we have, and goin' to stick up for each other, like we are brothers from another mother. Kinda like Mel Gibson and Danny Glover.
-  "OutKast, Return of the G"
Message 8 of 9
Established Member

Re: Can Dept of Ed Deny rehab on eligible defaulted loan?

I believe that you can rehab it as someone has said as long as it's never been fine before. Also, if you miss a payment you have to start over if they allow it. I rehabbed a bunch of loans before from a time that I had gone through a rough patch. Now if you don't want to deal with that you can just consolidate it and it will take it out of the default status too. Just know that any negative marks that led to the default are not removed. I believe there's a timeframe until they are as long as they loan(s) are not in default.
Message 9 of 9