Student Loans In Collections. Help!

[Anonymous]

New poster here so apologizes in advance for any mistakes...

I have a student loan in collections and I cannot rehab the loan ( i already rehabbed it in 2006)

Well I want to pay this debt off and start the process of rebuilding my credit so I called the CA that is handling the loan and they are willing to settle for $6,208 (the original amount is $8,506) however, they want me to make a payment by this 31st. I told them I can start on the 15th of September, to get my finances in order plus I want paperwork to ensure that I have everything in writing, but now they said if I don't provide a payment by the end of the month they are going to start the process to garnish my paycheck...

Can someone please provide me with some advice?

Should I give them my checking account info or provide them with money order monthly?

Can I negotiate away to start on the 15th or should I pay them on the 31st without anything in writing?

How is this going to be reported on my credit score wants its paid off and how will this affect my credit score?

Account Name US DEPT OF EDUCATION  
Account # XXXXXXXXX  
Account Type Education Loan  
Balance   
Date Opened 9/1/2001  
        
  Account Status Closed  
  Mo. Payment   
 Close Account Details Past Due   
  Payment Status Seriously past due date / assigned to attorney, collection agency, or credit grantor's internal collection department  
  High Balance   
  Limit   
  Terms 120 Months 

[Anonymous]

Welcome to the boards. Never ever give a collection agency direct access to your checking account. I know you cannot Rehab, but did you check to see if consolidating the loan would be an option.

Do you have the money to pay the settlement amount? If you do first get the settlement in written, second try to negotiate a pay for delete. Meaning you tell them I will pay the settlement amount if you will delete/ remove this from my credit report. If they agree I am going to say it again, get it in writing before you do anything.

If you settle the account and it is not deleted the collection will remain on your report but will show a zero balance, but it will still hurt your credit score.

On the wage garnishment, normally I would ask have they already got a judgment against you, but they don’t need a judgment to garnish wages for a federal student loan, but they have to send you something stating that they are going to garnish your wages.  

If you have no option and can only start paying next month, you are just going to have to take a gamble and hope they are bluffing.

But I believe you should be able to consolidate these loans.

Contact Direct Loan Consolidation

[Anonymous]

The original creditor is Dept of Education and that's what shows up on my credit report.  Can the CA  update my credit report as payed? Sorry for my ignorance.

And, no I cannot pay the whole settlement at once.

[Tazman81]

As another poster mentioned, you certaintly do not want to give out your checking account information for automatic debits.  That not only applies to CAs for student loans, but for any CAs.  They tend to increase the monthly amount being collected even if you have already agreed to a certain amount.

In your case, I understand you wanting to do the right thing, but unfortunately you jumped the gun a bit by contacting the CA.  Once you contact the CA, as you can see, they want money right then and there.  You may want to see if you can come up with some type of consolidation agreement with Direct Loans.  If not, I would first get any agreements in writing, and if you have to do a payment plan, make sure that is in writing as well.  Be prepared to make sure you don't miss any payments (and even be a little early with payments).

The CA will be able to update the balance to zero once it is paid off, but the damage has already been done.  An open collection with a balance weights the same as a paid collection without a balance when a computer is doing an automated review of your credit.  Now, they weight differently when your credit goes through a manual review as the reviewer can see that you have made a payment.

Good luck, and let us know what happens.

[Anonymous]

Yes, I definitely jumped the gun. This is great infor. Thanks guys.

[Tazman81]

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@Anonymous wrote:

Yes, I definitely jumped the gun. This is great infor. Thanks guys.

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Are you able to get a personal loan or anything to try to pay them in full?  Then maybe you can ask for a PFD.