Trying to set up payment on defaulted student loan.

[Anonymous]

So my sister is trying to build up her credit and the only thing she has on there is a defaulted student loan. She's tried to make arrangements to pay them monthly with an amount she's comfortable paying but they're extremely rude and don't want to hear it. They've sent her paperwork to fill out with her monthly expenses and came up with a weekly payment they was way too much for her. She's a single mother that's doesn't receive child support or help from the government. Is there any other options? 

[Tazman81]

Hi cara:

Is this a federal student loan or a private student loan?  If federal, she may want to see if she can get into a rehabilitation program.  This will allow her to start making payments on her loan, along with helping her score once the rehabilitation is complete as they will delete those negative payments.  Now, there is what is known as an Income Based Repayment plan.  It sounds as if that was the paperwork that they sent to her.  Based off of her salary and living expenses, that is how they come up with an amount for monthly payments.  if you don't mind me asking, how much is owed?  What are her normal payments, and what are the IBR payments they were offering?  Which company holds the loan?  I ask these as the more info the forums have then the more info we can provide as far as our own experiences that may be relevant or help in this situation.

[Anonymous]

Ok so what actually happened was they told her they wanted all of it. They claim it's $18,000 but the loan was for $14,000 and if she doesn't pay then they'll garnish %15 of her weekly income. I googled the number and it looks like the people who are calling her are from a collection company. "Financial Asset Management Systems, Inc" The last time she set up a payment plan it was supposed to be for $40 a month and they charged her $60 a month and she got mad and didn't pay it. She's now realizing how important good credit is and wants fix it. The paperwork they sent her asking about her living expenses she threw away because she thought it was a scare tactic... So how do I go about getting into one of these rehabilitation programs? And once she sets it up and starts paying on it will the negative info come off her credit report?

[Tazman81]

Yikes... 

Okay, well, based on the amount that you said was borrowed ($14k), it sounds like this was a private student loan.  Unfortunately private student loans are not as forgiving and many of them do not offer perks such as Income Base Repayment plans that federal student loans do.  Does your friend know who the original lender is?  If so, maybe you all can contact them to see if there is anything they can do to help and if they offer a loan rehabilitation program for private student loans.  With this though, your friend will have to be prepared to make payments (possibly substancial ones).  $50 a month will not pay off a $14k or $18k debt in a reasonable amount of time.  To give an idea of someone under a Federal Student loan IBR plan, the below chart tells what the annual AGI salary is and how much is expected to be paid each month.  My best advice would be to contact the original loan holder to see if it is not too late for them to get the loan back and you work directly with them.

Income-Based Repayment (IBR) Monthly Loan Payment
Annual AGI	Family Size
1	2	3	4	5	6	7
$10,000	$0	$0	$0	$0	$0	$0	$0
$15,000	$0	$0	$0	$0	$0	$0	$0
$20,000	$47	$0	$0	$0	$0	$0	$0
$25,000	$109	$39	$0	$0	$0	$0	$0
$30,000	$172	$102	$32	$0	$0	$0	$0
$35,000	$234	$164	$94	$24	$0	$0	$0
$40,000	$297	$227	$157	$87	$16	$0	$0
$45,000	$359	$289	$219	$149	$79	$10	$0
$50,000	$422	$352	$282	$212	$141	$71	$0
$55,000	$484	$414	$344	$274	$204	$134	$64
$60,000	$547	$477	$407	$337	$266	$196	$126
$65,000	$609	$539	$469	$399	$329	$259	$189
$70,000	$672	$602	$532	$462	$391	$321	$251
$75,000	$734	$664	$594	$524	$454	$384	$314
$80,000	$797	$727	$657	$587	$516	$446	$376
$85,000	$859	$789	$719	$649	$579	$509	$439
$90,000	$922	$852	$782	$712	$641	$571	$501
$95,000	$984	$914	$844	$774	$704	$634	$564
$100,000	$1,047	$977	$907	$837	$766	$696	$626

http://www.finaid.org/loans/ibr.phtml 

[Anonymous]

The loan she has is a "DIRECT loan" I was reading that the loan payments are negotiable. I'm gonna contact the Department of Education and see what I can do. Thanks for your help!

[CreditBob]

One very important thing to remember on these loans. That interest will be added to the current balance. Of course this will cause the account to have a higher balance like any other loan there is always interest. Here is one thing that can help. Always ask to speak to a higher up person such as a manager. The other thing that you can do is right a very nice letter this letter state your situation and let them know that I want to pay this loan off in full. Tell them your situation and ask, very nicely, what your options are.

[Tazman81]

That is good that it is a federal student loan.  Here is the link to Direct Loan's site.  Poke around as they have a lot of good information and hopefully something that will help your friend's situation.  Also, as another poster mentioned, be persistent.  it may take a couple of times contacting people before you can find the right person to make things happen.

https://www.dl.ed.gov/borrower/BorrowerWelcomePage.jsp

[Anonymous]

Thanks again!