Hi, Heather ... I recently attended your seminar hosted by my employer in Chicago but could not stay after to ask you this question.

I’m not proud of this, but I have around $20K in undergrad loans that, through carelessness and immature denial, have been in default for a couple years. I seem to be off the reachable radar of collection agencies for the moment, but would like to rehabilitate the loans and resume payments since I was recently engaged and don’t want to saddle my soon-to-be-wife with my irresponsible past habits. Are there any legal guidelines for negotiating fair rehabilitation terms with the collection agency? Is there anything preventing them from denying a payment arrangement unless I come up with a huge sum up-front and/or agree to payments I can’t meet?

I spoke to one attorney about acting as a (for lack of a better word) mediator, but he seemed reluctant to help and implied I’d have a difficult time finding someone to assist since there’s little incentive for them to negotiate.

Thanks in advance for your help!

When I say “off the reachable radar of collection agencies at the moment,” I just mean they aren’t actively contacting me or anyone I know ... I realize the debt is still there and needs to be addressed. Thanks again!

Hi James and Heather ... just checking in to see if you had any thoughts on my question above. Thanks!

Hello Keith.  Sorry for not replying sooner.  Here are some thoughts on your situation.  It is a good idea to be thinking through how to get out of default.  The first thing to do is gather up all the info on your loans. Go to the National Student Loan Data System at http://www.nslds.ed.gov/nslds_SA/ to inventory all your federal student loans.  You can download a free copy of your credit report at https://www.annualcreditreport.com/cra/index.jsp to inventory all your private student loans.  This will give you a clear picture of all of your loans and who “owns” them, so that you know who you will be dealing with. 

I’m hoping you have mostly federal loans?  For federal loans, loan cancellation can help a few borrowers, and you ought to double check whether any of these circumstances apply to you: http://www.studentloanborrowerassistance.org/loan-cancellation/  Most likely you’re going to want to consider rehabilitation or consolidation to get out of default.  I’m not sure if you have previously used consolidation as a way out of default, but if you haven’t, consolidation is likely to be a good choice.  Consider the pros and cons of rehabilitation or consolidation to get out of default.  The best resource I know of for you to learn the steps is: http://www.studentloanborrowerassistance.org/default-and-delinquency/repayment-get-out-of-default/.

Here are a few more things to think about if you have private loans.  Private collectors do not have as many collection tools as the government.  There is a time limit for collection.  The limits vary by state, but tend to be six years after default.  You or a consumer law attorney in your state (should you decide to hire one) could research the statute of limitations where you are.  As you know, often private lenders will hire collection agencies.  You have certain rights to fight back against any harassment or abuse by collection agencies, should those harassing phone calls begin.  Collection fees for private loans should be listed in your loan agreements.  There may also be other laws in your state that limit the amount of collection fees that private creditors can charge.  The main thing the private lender can do is sue you in court.  Some private lenders may eventually negotiate a payment plan or debt settlement with you.  IF you have a lump sum of money, there may be some possibility of settlement of private loans: http://www.studentloanborrowerassistance.org/default-and-delinquency/compromise-settlement/.  I know that isn’t an option for most of us.

You may want to look into finding an attorney who specializes in consumer law in your area.  Heather is a member of the National Association of Consumer Advocates, and that’s the place to look at http://www.naca.net/find-attorney.

Read through this stuff carefully and you should have a clear understanding of your options.  Let me know as other questions arise.

Sorry for the long e-mail.

With kind regards,

James Jarvis
Communications Director
Heather Jarvis, Student Loan Expert LLC