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collection agency doesn't want me to rehab

New Member

collection agency doesn't want me to rehab

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.  Smiley Frustrated

 

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!

Message 1 of 8
7 REPLIES
New Member

Re: collection agency doesn't want me to rehab

I rehab my defaulted loan a few years back. Originally they wanted me to pay over 800 a month. I told them I wanted to itemize my monthly expenses. Basically give then a break down on my bills. My payment was dropped to 103 a month. Sounds like they are trying to play hard ball. I would just keep insisting and calling back until you can find the right person to help you.

Message 2 of 8
New Member

Re: collection agency doesn't want me to rehab

Thanks for the reply.  $800, that's ridiculous!  Glad they finally worked with you on that.  I actually got a call today from my rep saying she hadn't heard back from my college yet and was going out of town for a few days so I wouldn't hear from her for a few days yet lol.  Maybe next week I can get ahold of someone at the school and make sure they're alright with a reasonable payment.

Message 3 of 8
Regular Contributor

Re: collection agency doesn't want me to rehab

I had to rehab 18 different student loans back in 2013/2014, and the Perkins Loan was by far the hardest when negotiating with the CA.

 

They shouldn't have to talk to your college at all when it comes rehab terms.

 

All they have to do with the college is to sign back over the debt to them when you finish rehabbing.  At least, that's the way it was with my college. The college, itself, was the Perkins Loan sevicer.

 

Next time you're on the phone with the CA, make it clear you're trying to negotiate a fair and reasonable monthly payment you can afford (using the IBR formula, most likely) for rehabilitating your loan. If they don't comply, tell them you'll be contacting the federal ombudsman.  If they still don't comply, then DO contact the federal ombudsman. 

 

I'm betting they'll quit fiddling around, and complete a contract with you. 

 

I'm in public service, and since I rehabbed my Perkins Laon, I've gotten 50% of it cancelled. 2 more years, and I'll have the whole thing cancelled. 

TU FICO: 778 ||| EQ FICO: 784 ||| EX FICO '08 : 780
Message 4 of 8
New Member

Re: collection agency doesn't want me to rehab

Well, it's been over a year since this started.  It took a few months with some back-and-forth with the CA rep (and never did hear back from the finance controller guy at my college) but supposedly the college would not come down and "required" a payment of either $100 minimum or $150 and they'd prefer $150.  I was tired of dealing with it so I elected to make the $100/month payments, which I could afford but are more than double what I paid before the default (and I've been on IBR with my Stafford loans for years).  My first payment was made in October and my ninth consecutive payment was made a few weeks ago.  I emailed the rep to see what to expect next but, as expected, have not heard back from her (though, to be fair, she could be on vacation).  I did log in to my account on the old loan servicer's website (they're administering the loan for my college, which is the loan holder) and the loan is once again active (previously it was showing in default if I logged in).  It doesn't list a minimum payment yet.  It's also appeared on my credit reports (according to Credit Karma) showing in collections/charged-off with lates for all this time I've been paying the CA.

 

My understanding is that when it begins reporting as rehabbed, the "in collections/charged-off" should disappear, do the lates disappear as well?  Also, it was my understanding that the college was supposed to work with me on negotiating a reasonable payment and they did not do so (at least from what the CA agent said).  I know a lot of students leave my college in a great deal of debt and many don't even finish, so I'm sure I'm not the first person they've done this to and I think it's shady.  Due to this, I am considering making a report to the student aid ombudsman detailing the actions of my college, the loan servicer, and the CA.  I'm mostly considering it because I don't feel that they were willing to work with me on coming to reasonable payments (and trying to pull that "divide the total into 9 payments so you don't forget you're supposed to be paying this loan off" stunt--what if I'd missed one and needed to start over?).  Does this situation warrant a report to the ombudsman?

 

Now that they are going to be back in repayment, I'm going to do my best to get paperwork in for the forgiveness/cancellation I qualify for due to my profession (I wish I'd known from the start about it as it would have put the loans into deferment and cancelled a percentage every year--I'd have them halfway done by now without a dime from me, and this entire situation could've been avoided) and try to get it applied retroactively.  If not, I will certainly keep it up for the future so it gets forgiven like it should.  Lesson learned, look into any options you might qualify for to help pay back your loans!

Message 5 of 8
Frequent Contributor

Re: collection agency doesn't want me to rehab


@toadstool21 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.
EX FICO8: Jul 2018 - 572 | EQ FICO8: Jul 2018 - 573 | TU FICO8: Jul 2018 - 578
TCL: $1,450 | AAoA: 7.9 yrs (I can thank my student loans for this) | Util: 82% (high due to charge-offs)
Cleaning up and rebuilding after a long hiatus from credit
Message 6 of 8
New Member

Re: collection agency doesn't want me to rehab

Thanks for the response.  That is what I suspected to be the case and part of why I want to report them to the ombudsman.  They also are potentially denying people the benefits of rehabilitation, particularly to their credit score, by doing this.  Also, by requiring I pay so much of it off, they have denied me the benefit of having my loan forgiven because of my public service profession.  Wish I'd known about that sooner!

Message 7 of 8
Frequent Contributor

Re: collection agency doesn't want me to rehab

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.

BK7 Discharge 1/16
10/15 ~ EQ: 406; TU: 520
3/18 ~ EX: 666; TU: 646; EQ: 650
Message 8 of 8