help my GF please :)

[rootpooty]

Lately ive been a myfico guru helping members out when i can and what not cause thats what we are all here for. However, i dont know anything about school loans so heres the deal.

2-3 years ago she took a semester and I guess took out a loan (this is all i know).  Now back in jan she applied to go back to school again and I guess seeked financial aid or something along those lines and they denied her cause she defaulted on the loan from 2-3 yrs ago. The amount is roughly 2000 I believe.  They told her that she needed to setup a payment plan for the loan and pay on it for 6 mos so she could go back to school. Shortly after the collections dept for the loan calls and tells her that they will accept 50 dollars a month that way she can start school in jan.

The amount is on her reports so i take it as this is just another collection and stays on her report even if its paid correct?  They also told her that if she doesnt start paying on it now that they will garnish her tax return next year.

Again I know nothing about school loans so if you guys need more info just ask please I need to help her get back to school

[SCF]

Before she does anything (including taking that payment plan with the Collection Agency), we need to figure out if these are federal loans.

Federal loans have the option for rehabilitation, which takes 9 months of on-time payments, removes the negative tradelines, and restores your eligibility for further federal aid as well as some other federal programs (like FHA loans and the like).  So, if they are federal and she is defaulted, she almost certainly wants to do rehab.

If she doesn't know, have her go to the National Student Loan Data System at https://www.nslds.ed.gov/nslds_SA/.  That will show here ALL of her federal loans and where they are held.  Anything not on there is private.  Report back with the specific loan types and amounts, and who you're dealing with and I'm sure others will have specific experiences they can share about working with that agency and getting started on rehab.

[rootpooty]

thanks for the reply i really appreciate it i will ask her in the morning what type of loan it is and report back

[rootpooty]

ok so I found out that the loan isnt federal and that its from bank of america and the amount is 1790. I looked at her experian report that she just got in the mail and under original creditor its blank. The CA called again and told her the same thing, that she would need to make on time payments for 6 mos @ 50 a month to enroll this winter back to school and said that if she pays on time for 9 mos that they will defer is what you call it the balance until she finishes school.  What should my next move be im just trying to help her out and get her back to school.

back in early spring i paid for her to apply at a local school and when they got back to her about financial aid they told her that she needed to take care of the loan thats in collections first. when she contacted the CA (i believe they specifically deal with student loans) 3 different reps have all told her the same thing about what needed to be done to go back to school.

[SCF]

If it's a private loan, then your options are more limited.  Basically, they are whatever options the lender or CA will give you.  You don't have the same options for rehab, deferment and forbearance that are gaurenteed for borrowers with federal loans.

Is your girlfriend eligible for federal loans this time around?  What type of aid are they going to offer her if she takes care of this loan?

Also, any chance you could pay the whole amount?  With a private SL, it's possible to negeotiate a PFD on the collection, just like any other debt (I belieive), and that would certainly be the fastest and cleanest way to deal with it.

[rootpooty]

she isnt seeking a federal loan this time around. the reason she took out a private loan was because she was supposed to stay with a relative during a semester but that fell through so she needed to rent a place.  She tells me she gets a pelgrant (I think thats what you call it).  However she cant obtain it for school purpsoses until she starts making ontime payment on the loan. I asked her about pif on the loan and she told me the CA recommends she pay on it for 6 mos so she can enroll then pay on it for an additional 3 mos (9 mos total) so it would make the loan deffered until she completes school.

So one of my concerns is if they make the loan deffered how does that come into play being the account is in collecions

[Anonymous]

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@rootpooty wrote:

she isnt seeking a federal loan this time around. the reason she took out a private loan was because she was supposed to stay with a relative during a semester but that fell through so she needed to rent a place.  She tells me she gets a pelgrant (I think thats what you call it).  However she cant obtain it for school purpsoses until she starts making ontime payment on the loan. I asked her about pif on the loan and she told me the CA recommends she pay on it for 6 mos so she can enroll then pay on it for an additional 3 mos (9 mos total) so it would make the loan deffered until she completes school.

So one of my concerns is if they make the loan deffered how does that come into play being the account is in collecions

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IF and thats a big IF she has the money to pay it all off in full - ignore the "we can defer the loan". They kinda want to do that because it means it will rack up more interest in the end so IF she can pay it off in full I'd say do a pay for delete and have her just say "I just want to get rid of this loan now" and fall for the "but we can stretch it out for you." schpeal they'll try to give her.

Now if she can't PIF then she kinda can only haggle so much. Usually SL collections aren't really different than other collections when they are for private loans. The bank gave them terms that they will accept and the collection agency tries to get that if not better. The collection agency is literally just that - an agency that is trying to collect the banks money.

I would suggest she talk to an independent person (i.e. someone in the school's financial aid department - pretty much any and every college/university no matter how big or small has at LEAST 1 person if not a slew of people that knows the ins/outs rules and regs far better than us that she can meet with for free to discuss what her options are and how to procced. 

[SCF]

If she qualifies for a Pell Grant, I'm confused as to why she would not get federal loans this time around.  Unless you've defaulted on a federal loan, run astray of another federal program (things like FHA subsidized mortgages, etc. all pull from the same "in default, don't lend to them" database), or maxed out her federal loan benefits (which would mean she's been in school for quite a while potentially), they should be available to her.  Pells, since they are essentially free money, have the strictest income and other requirements.

She really needs to go sit down with a financial aid advisor from her school.  Bring all of the information you've gathered about this account, her finances (like her FAFSA and supporting documents), and the info you need to access the National Student Loan Data System.  They'll be able to get a handle on the big picture and help her choose the best options.

She also needs to do a PFD and get rid of the defaulted loan if she can afford it.  That will save interest and stress in the long-term.

If it turns out she's not eligible for federal aid, and it's not one of the reasons I gave above, do you mind telling us?  There's a lot of ins and outs with this system, and that type of information would help others in the future.

[rootpooty]

Ok so im back with the full blown info I think I need to provide for further help.  Ok so I had her log on to the link that SCF provided me with and it turns out that it was indeed a federal loan that she took out. As I mentioned in a previous post the agency that is sort of assisting her get back on track told her that she need to make 6 mos of on time payments to qualify for the pell grant and then 3 more mos (9 mos total) to put what I think is called rehab

My income alone (we live together and have 2 little girls) supports us and because of her mothers income and some other thing I cant remember off the top of my head she qualifies for the pell grant cause thats what she lived off of when we werent living together a year and a half ago.  She is just seeking pell grant for school supplies and maybe if we needed assistance with a care taker for out children so I guess there wouldnt be a need for more federal loans or would there be?

I need to jump on this soon cause we missed the chance to enroll her earlier this year when they notified her that she wasnt elegible due to the default loan which i was under the impresion that it was a private loan but it is indeed a federal loan.  I wasnt able to start paying on it then for her cause we had just had a newborn and we all know they can be costly but now with my promotion and good income I want to do whats best for her.

as always thank you for your help

[SCF]

Since it is a federal loan, do the rehab.  You can read a lot on this forum about the rehab process, so you can make sure things are going the way you would expect.  9 months is the standard term, and I don't know anything about being able to get further loans at 6 months (since you are technically still in default until the rehab completes and your loan is picked up by a new lender), but that may be the case.  I would confirm that with someone at her school's financial aid office though.

If she is eligible for Pell grants, that should be the first money she accepts and uses for tuition and other expenses.  Then look for scholarships and if neccessary take out federal loans.  Private loans should be a last resort.  It will be much better in the long run if she delays her enrollment a little bit and you guys get the financial pieces squared away.  Don't make the mistake of borrowing more than the degree can afford to pay off.