Hi all,
After a recent bout of unemployment, I found out that my Perkins loan has gone into default. When I received the initial phone call last Friday, the CA rep told me I had three options, I could pay it in full, consolidate, or set up a payment plan of six monthly payments to pay it in full. When I told her I'd need to think about whether to consolidate or do the monthly payments, she told me I had to call her by Monday at 5 PM to let her know if I was going to consolidate or pay in full. I told her paying in full was not an option but I would need to think about the other two. I asked her for a number to reach her at and she hedged, telling me she'd email me her contact information. Over the weekend, I spent a good bit of time researching, including finding this site, and realized that rehabilitation is an option she conveniently forgot to mention (this is the first time I've ever had a loan in default).
I found the name of the collection agency from the former servicer, ECSI (I'm pretty sure she neglected to tell me where she was calling from) and found a number for them. Monday I called, eventually got transferred to the correct department after my rep was unavailable, and spoke to a reasonably competent and sympathetic woman who wanted to make sure I understood the difference between rehabilitation and consolidation and when I discussed why I didn't and never have wanted to consolidate, she said I seemed pretty familiar with the process...and when she put me on hold to find something out about the rehab payments, she transferred me to my personal rep. 
My rep told me that in order to rehabilitate the loan, they would split the balance into 9 monthly payments and then I'd be done. I informed her that was not how it's supposed to work, and she argued with me! She said she would have to contact the school to see if they would agree to rehabilitation and wanted to know what I considered a reasonable payment. I listed a range I would be willing to pay that I thought was reasonable (higher than my original loan payment was, even) but she didn't know if the school would "approve" it. She said the reason they usually do 9 monthly payments is that supposedly students "forget" they still have to pay the rest of the loan back after rehab. She also told me thet the loan will go directly back to the former servicer once I complete the rehab. Once I got off the phone with her, I called my college and got transferred to the controller's voicemail since he's apparently the one who would approve such things. I haven't heard back from him yet, though. I'll be trying again soon.
Since I've read on this site that sometimes CAs don't even mention a reasonable payment to the college and instead try to make it absurdly high, what are my options if she comes back to me with a payment that is more than I can manage or think is reasonable? What if she claims the college doesn't want to do rehabilitation--the college isn't allowed to refuse me this, are they? I'm still peeved that the rep did not bother to try to inform me of all my options, but I don't expect much of someone who works at a collection agency. Another question I had was that the Perkins loan went into default after 150 or 180 (not sure at the moment) days behind, but I thought it was 240 or 270 days for federal loans? I also don't want to pay back too much of my loan because I found out belatedly that I qualify for part of the loan to be cancelled due to my occupation. I now have a job again, so paying the loan back won't be an issue once it comes out of rehab. I just don't want to get swindled by the collection agency. I'm disappointed it's come to this because I'd been paying ahead on this loan before I became unemployed last year and had planned to have it totally done by the end of this year.
Any help or advice would be appreciated. Thanks!
@Anonymous wrote:My rep told me that in order to rehabilitate the loan, they would split the balance into 9 monthly payments and then I'd be done. I informed her that was not how it's supposed to work, and she argued with me! She said she would have to contact the school to see if they would agree to rehabilitation and wanted to know what I considered a reasonable payment. I listed a range I would be willing to pay that I thought was reasonable (higher than my original loan payment was, even) but she didn't know if the school would "approve" it. She said the reason they usually do 9 monthly payments is that supposedly students "forget" they still have to pay the rest of the loan back after rehab. She also told me thet the loan will go directly back to the former servicer once I complete the rehab. Once I got off the phone with her, I called my college and got transferred to the controller's voicemail since he's apparently the one who would approve such things. I haven't heard back from him yet, though. I'll be trying again soon.
This is a direct contradiction of the rehab protocol given by the Dept of Education. Here is a publication from the Dept of Education for universities that contains requirements and guidance on Perkins student loan billing, collection and default. On p.167 under the heading "Perkins Loan rehabilitation" it states:
The rehabilitation payments should be sufficient to satisfy the outstanding balance on the loan within a 10-year repayment period. A school may not establish a loan rehabilitation policy that requires defaulted Perkins Loan borrowers to pay the full outstanding balance of the loan within the nine-month rehabilitation period, if such payments would create a hardship for the borrower. In most cases, such a policy would require a borrower to make excessively high monthly payments, and would, in effect, deny the borrower access to a statutorily mandated benefit of the Perkins Loan Program.
After you've completed rehab, your loan should be sold to another servicer. Sometimes it's quick and sometimes not. I had 2 different rehab plans and on one of them I had to make an extra payment after my 9 months was up. Just keep that in mind. I hope you are able to get the forgiveness done.
