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Private Student Loan Default

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Joined 2012-10-09

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I have contacted so many people and gotten so few answers that I am about to give up . . . again. In fact I have given up multiple times, but my problem persists and eventually I work up enough frustration to tackle it again. Maybe you can help!

There are thousands of websites dedicated to federal loans, but practically nothing on private loans and even less about private loan default. 

It is a very long story, but the short version is 4 years ago I missed a few payments on my private student loans.  $40,000 then defaulted.  Within days I was on a “rehabilitation” program.  The deal was that I would make 6 months of outrageous payments and my loan would be rehabed. I did, only to be told that my lender had filed bankruptcy and rehabs had been suspended. I was told if I wanted the loan rehabed I had to start the program over again . . . so I did.  After a year of large payments I was told that the rehab program had been cancelled with no further information.  Since then I have continued to make payments to avoid legal ramifications and in hope that I could actually rehab the loan if a program is reinstated.  4 years I have been making payments and I still owe $40,000 as I seem to only be able to afford the fees and interest.  4 years a default has sat on my credit report as it continues to re-age every time I make a payment and yet I get not credit benefit for 4 years of on-time payments as those are not reported.  I can’t pay $40,000. If this madness continues I will never own a home, or a new car, or finance anything ever again all due to a couple of missed payments over 4 years ago.  I have talked endlessly to the collections agency, the loan holder, debt consolidators, credit counselors, etc. Everyone sympathizes, but no one has any idea of anything I can do. 

Of everyone I have found you seem to have the most expertise on student loans. Heather please tell me you have some advise for me.

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Total Posts: 40

Joined 2012-06-20

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Hello Niagra.  I’m very sorry to hear of your situation and unfortunately it is becoming much more common, so you are certainly not alone.  My name is James and I am Heather’s Communications Director (and husband).  Here are a few suggestions for you:

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 (http://www.naca.net/find-attorney).

The first thing to do is gather up all the info on the loans (which you may already have). If you had any federal student loans, you would go to the National Student Loan Data System to inventory them (http://www.nslds.ed.gov/nslds_SA/).  Download a free copy of your credit report to inventory all the private student loans at https://www.annualcreditreport.com/cra/index.jsp.

For federal loans, loan cancellation can help a few borrowers, and you ought to double check whether any of these circumstances may apply to you: http://www.studentloanborrowerassistance.org/loan-cancellation/  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/

A few more things to think about.  Since you said that your main problem is with a private lender, private collectors do not have as many collection tools as the federal government.  There is also a time limit for collection.  The limits are different in different states, but tend to be around six years after default.  An attorney in your state could research the statute of limitations there.  Often private lenders will hire collection agencies.  Borrowers have certain rights to fight back against any harassment or abuse by collection agencies.  Collection fees for private loans should be listed in the loan agreement.  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 in court. Some private lenders may eventually negotiate a payment plan or debt settlement. 

My hope is that over time, borrowers will have more options, but for now these are your best bets.

Good luck!

With kind regards,

James Jarvis
Communications Director
Heather Jarvis, Student Loan Expert LLC

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Joined 2012-10-09

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James,

Thank you for your reply.

Where can I find information on time limits for collection? Also, are these time limits after default or after the last time I made a payment? I have been looking for a attorney in my state, but am having a hard time finding anyone who knows anything about private student loans.

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Joined 2012-06-20

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Niagra,
    As I mentioned in my previous post, the National Association of Consumer Advocates is the best place to find a lawyer specializing in student loan defaults.  To the best of my knowledge, the time limits are after default but I will confer with Heather on that.

Good luck!

James