I Defaulted on My Student Loans. Here’s What I Did to Get Back on Track

When I began taking out student loans for university, I had a fool-proof five-year plan for paying them off. I was going to go to graduate school, become an elementary school teacher, work in a high-needs public school for five years, and have the rest of my federal debt forgiven. Simple. If I stuck with the plan, I didn’t need to worry about those loans at all.

Of course, life didn’t go as smoothly as I had envisioned as an 18-year-old. This became glaringly apparent 10 years later, when I received an email from the HR department at my company:

Attached is a copy of a Wage Garnishment Order filed by the U.S. Department of Education.

We are commanded to immediately remit 15% of your disposable pay to the U.S. Department of Education each pay period. Deductions will begin on your next paycheck. We cannot reduce, amend or discontinue the deduction without written authorization from the U.S. Department of Education.

Please contact our office should you have questions or require additional information.

Thank you.

I have a confession to make. I’ve defaulted on my student loans. I know I’m not alone in this. But here we are. We all have our reasons for being in this situation. It’s not a shameful or embarrassing position to be in. It just is. And, as I’ve recently learned, we have options if we aren’t afraid to pursue them.

I never intended to default on my student loans. Like I said, I had a plan. After graduation, I spent a few years teaching English abroad and paid my student loans every month without fail.  When that job finished, I moved to New York for graduate school and deferred my loans while studying for my master’s degree in education. But then a funny thing happened. I decided that I didn’t want to be a teacher anymore. I had no idea what I wanted to do career-wise—I had some vague idea of doing something in book publishing—but other than that, I was at a loss. I was also broke and about $20,000 in debt to the U.S. Department of Education.

I funded all of my college and graduate school living expenses on my own by waiting tables.  So, while I tried to figure out what career I wanted to pursue, I went back to serving to pay the rent. Although being a server in New York City can be wildly lucrative at the right establishments, I was working at the kind of restaurant where breaking $100 during a weekend shift was considered good money, and a “raise” meant helping ourselves to as much beer as we could handle without getting caught by the manager. Between paying for both my rent and living expenses, and saving a little bit of cash for going out, it felt like I had nothing left over for my student loan payments.

Fortunately, I had a six-month grace period before I had to start repaying my loans after graduating and I was confident something would turn up. But six months later, the only career-related job I’d found was an unpaid internship at a small literary agency. My income came entirely from the tips I made waiting tables. It was barely enough to cover all of my expenses and instead of setting up a repayment schedule or requesting a financial hardship forbearance, I decided I would much rather just stop thinking about my loans. I knew that the minute I earned more money, I’d start making the monthly payments again, so what was the point in dealing with all that bureaucracy?

At first, it was easy to not think about my loans. I have a hate-hate relationship with debt. I won’t buy things I can’t afford to pay for entirely up front. I don’t have credit cards. I have no personal or consumer debt, so it was easy to ignore my one and only source of debt. My creditors would send bills each month, and I would throw the envelopes away without opening them. Not paying my loans didn’t seem to have any effect on my life at that exact moment. I was sure my credit was ruined, but I had a long-term lease and eschewing credit cards and other forms of personal debt meant I didn’t care much about my credit score. And I still believed that my non-payment was just a temporary blip. I was certain I’d start to pay my loans off soon. I had faith something would turn up.

One year into default I started getting phone calls from strange numbers. I knew it was probably my student loan lenders. I thought maybe I should pick up the phone and deal with the financial mess I’d made, but every time I thought about it, I told myself I’d do it tomorrow. The truth was, I was scared. I couldn’t face how big my debt might have gotten. I worried that the collection agents would berate me for being so irresponsible. I didn’t know how to even begin to explain myself or have the conversations that I needed to have to find a solution to my problems. I was afraid that I’d screwed things up so badly that there was no way to fix it. I didn’t even have the money to start paying $100 a month, so what was the point? It all seemed so impossibly difficult. Continuing on in default seemed like the only option for me. My phone rang with increasing frequency. I started screening my incoming calls and would only answer when I knew who the caller was. It was annoying, but I could live with it.

I started working at a better restaurant and even with a 25 percent increase in the tips I made, I didn’t view the extra money I earned as money that could go towards paying off my student loans. For the first time in my adult life, I felt more or less financially comfortable, and I wasn’t willing to go back to scrimping and saving. No more instant ramen dinners, Forever 21 jeans and boxed hair dye for me. I deserved a little luxury in my life. I used my newfound wealth to go on a long-deferred vacation, to buy a new mattress, to try that amazing restaurant I couldn’t afford to visit before. After all, I’d been ignoring my loans for so long and there hadn’t been any negative consequences so far. What was another year or two?

Sometimes, I started to feel panicked about my loan situation. I would dream up all sorts of get-rich-quick schemes. I’d win the lottery or write the next blockbuster YA novel. I looked into becoming a dominatrix at foot fetish parties. I tried out for the game show “Who Wants to be a Millionaire.”

I finally found a full-time 9-to-5 job with benefits, although the salary was just about what I made waiting tables. And still, I ignored my student loans, living as thought I was completely debt-free. I knew that this was a mistake. But by then, five years into default, it seemed too late to remedy the situation. And then came the email from HR.

When the government garnishes your wages to repay your student loan debt, they are allowed to take 15 percent of your post-tax salary—or 25 percent if you owe student loans to two different creditors—and send it to the collection agency. The money first goes to pay collection costs and fees, and then when that has been paid off, towards the principal balance and interest. For some reason, I didn’t view wage garnishment as a big deal. I was thrilled that I wouldn’t have to remember to pay my loans every month; the government was basically doing all of the work for me. Around $500 a month was withheld from my paycheck to repay my loans, a rate much higher than if I had been repaying my loans on an income-contingent repayment plan. Even after garnishment, I was taking home about $450 a week, which I could live on in NYC if I were frugal. This seemed like a win-win situation, as long as I didn’t worry too much about my credit score. I still had no idea how much exactly I owed, or to whom, but since all of my loans were federal loans, I figured the money would eventually make it to the right people and everything would be paid off in five or six years at most.

I had read online that there were options for people in default. The first option was to rehabilitate my loans, which requires borrowers in default to make voluntary, on-time payments based on income vs. expenses for nine out of 10 consecutive months. Once a borrower has successfully done so, the loans come out of default, wage garnishment is stopped, and borrowers are eligible for the same benefits available for the loan before default.

In addition, rehabilitating a student loan will restore your credit, and collection costs for the loans forgiven. The other option was loan consolidation. This involves making voluntary on-time payments based on income vs. expenses for two to four consecutive months. While this option is faster, credit will not be restored and you will still owe the collections fees that can increase your debt by up to 25 percent. With both options, borrowers pay a fee of up to 18.5 percent of the total debt to the collection agencies, which is added to the principal balance after the loans have come out of default. I’d thought about rehabbing my loans, but I managed to talk myself out of it every time. The voluntary fees would probably be too high for me to afford. Setting up the rehabilitation plan would be too time-consuming. Would I have to call up all three collection agencies and negotiate a new deal with each one? What if the agencies treat me like an idiot? What if they can’t help me at all? Wouldn’t it be easier to just go on in default for years until it’s paid off, even if I have to live a hand-to-mouth existence until then? It was all just too complicated.

However, after two years of wage garnishment and generally avoiding the reality that I did, in fact, owe a substantial amount of money to the government, I decided to get my act together: No more stupid excuses. I was going to take responsibility for my poor financial decisions and get out of default. I only had myself to blame for getting into this mess. No one was going to fix it for me. It was up to me to fix it on my own.

The hardest part was making that first phone call. I went to Washington Square Park on a sunny afternoon, mentally preparing myself. You can do this. The Department of Education is here to help you. You have options. Don’t be a punk. Make the call.

I first called the U.S. Department of Education’s Debt Collection Service Information Center, whose number was listed on my wage garnishment order. The woman on the line was perfectly pleasant, but told me that I would have to speak directly with the three collection agencies that currently held my loans to discuss my options. To my surprise, even though I had only taken out federal loans, that did not automatically mean the collection agencies in charge of recouping those debts were the same. My loans had been sold off to different agencies based on the type of loan I had taken out and which school I had been attending when I took out the loans. She gave me the numbers for the three agencies that were in charge of collecting my federal student debt and what I currently owed for each loan. For the first time in years I knew the exact amount of my student loan debt. It wasn’t as bad as I thought. I still owed more or less what I owed before I had gone into default: $20,000. Even though almost $10,000 had been withheld from my salary during the last two years, the interest and collection costs that had accrued over the eight years I was either in deferment or default had caused the size of my debt to increase by almost 50 percent. But, it was a massive relief to finally, finally know where I stood. The woman also told me that all of this information was available online at the National Student Loan Data System of Students where borrowers can view all of their federal debt and get information regarding which agencies currently hold that debt.

Before I had a chance to change my mind, I called up the first collection agency on the list. I wasn’t sure why I was so nervous, but I was. I explained why I was calling to the operator, who passed me on to the correct department. I was only put on hold for about 10 minutes—not even long enough for me to change my mind about continuing on with the whole process. I took the quick hold time as a sign that everything was going to be all right.

My case manager, Sharon, introduced herself. She sounded a little young, but positive and cheerful. I explained the situation as best I could, and said that I wanted to try to rehabilitate my loans. I don’t know if I sounded worried or not, but Sharon was a reassuring presence. She told me that many people found themselves in default, that my situation wasn’t unusual and that the reasons why didn’t matter as much as our desire to get ourselves out of it. She told me that she was there to assist me in any way she could. We would work together to remove my loans from default.

Sharon informed me of the two options available to me: rehabilitation or consolidation. Because my wages were being garnished, the voluntary payments would be in addition to what was already being deducted from my paycheck. Since my take-home salary after taxes and garnishment was low, my voluntary payments would only be $100 per month. If I hadn’t allowed things to get to the point where my wages were being garnished, voluntary payments that both myself and the collection agency agreed were “reasonable and affordable” would have been calculated based on how much how large my debt was, family size, and how much money I made on a monthly basis once expenses have been taken into account. There is no one-size-fits-all percentage to determine voluntary payments—it depends on a variety of factors unique to the individual borrower, and it is open to negotiation if you feel the amount that the agency believes you can pay is too high.  Since I couldn’t afford to pay an extra $100 each month for nine months, I chose to consolidate my loans. I knew consolidation meant a death sentence for my credit score, but financially, I didn’t have a choice.

When you consolidate your federal loans to get out of default, you apply to the William D. Ford Direct Loan Consolidation Program. This program is run by the U.S. Department of Education and only consolidates federal loans. Because this program is run by the government, the interest rates are much lower than consolidating with a private company and your federally consolidated loan is eligible for many benefits that consolidation via private companies can’t provide, such as the ability to apply for a financial hardship forbearance or to defer your loans should you go back to school.  Although most borrowers who consolidate with this program have many repayment options, if you are trying to get out of default, you must use the Income-Contingent Repayment plan, which calculates monthly payments based on your income, family size, and the total amount of your loans. The Department of Education provides a calculator to help borrowers estimate their payments under this plan, and I found that my monthly student loan payments would drop to half of what was currently being garnished from my wages.

Sharon carefully explained the process for consolidating my loans, the benefits of getting out of default, and informed me of the two most important aspects of rehabilitation via consolidation. I had assumed the most important thing I could do was make those on-time, voluntary payments. However, equally important was completing the paperwork quickly and correctly.

The time it takes to consolidate your loans and get out of default varies depending on how quickly the Department of Education processes your paperwork. If there are any mistakes, you have to resubmit your paperwork and start the process over. Different departments within the Department of Education work at different speeds, so the separate parts of your consolidation application may be processed at different times. If the paperwork is submitted and approved immediately, those voluntary payments may only last for two months before the loans are consolidated and considered out of default. However, if there are problems or if you take a long time to return the paperwork, the entire process can take three or four months, and you must keep making voluntary payments until consolidation is approved. If you miss a month, then you must start the whole process over from the beginning.  Plus, you can only get your loans out of default through rehabilitation or rehabilitation via consolidation once. If you default again, you are not eligible to rehabilitate them a second time. Essentially, you are dealt one, and only one, get-out-of-jail-free card.

The following day, Sharon called me and we filled out the application together, page by page, to ensure that the consolidation application was completed correctly. All of my federal loans, including loans that were being handled by different agencies, were added to the consolidation application so that I only had to deal with one agency to get out of default entirely. Throughout it all, Sharon knowledgeably answered my questions about the parts of the application that were unclear, as well as any further questions I had about the process in general. Whatever worries I had, she quickly alleviated. Most importantly, she never made me feel like an irresponsible loser for making such obviously stupid decisions about my student loans. These things can happen to anyone, she reassured me. All that matters is that you are taking charge of the situation now. I believed her.

The key to successfully completing this entire process is communication. Sharon contacted me to confirm that my paperwork had been received and sent on to the Department of Education for review. We set up a time to speak once a week to discuss what progress had been made with the application. Part of Sharon’s job is to continually follow up with the Department of Education with regards to my case. In our weekly phone calls, even if no real progress has been made, she keeps me apprised of how everything is going. I’m only three weeks into the consolidation process, so in the next month or two I can probably expect to speak with Sharon two or three times a week. For the first time in years, I’m not screening my calls. I’m not afraid to pick up the phone. It’s a wonderful feeling.

I don’t know how all of this will turn out. Maybe getting out of default will take much longer than expected. Maybe one of my loans won’t be eligible for consolidation. Maybe this process will be a lot harder than it seems. I know I only have myself to blame for getting myself into this mess. I’m proud of myself for taking that first step. Making the first call was the hardest part. But once I got past that hurdle, the task at hand didn’t seem quite so daunting. All of the excuses I made for not dealing with my student debt earlier now seem ridiculous.

I know everyone in this situation has a different set of obstacles to overcome before they can consider rehabilitating their student loans. You might have private loans, which may be harder to rehabilitate. You might not have the financial ability to make the monthly voluntary payments. Perhaps you have family commitments that take precedence over dealing with the rehabilitation process. But for me, getting my loans out of default wasn’t as impossible or as terrifying as I had imagined. So far, it hasn’t been that bad at all. I don’t know what I was so afraid of.

I’m only halfway through this process. But: This experience has taught me that we—myself and the roughly 6.8 million student borrowers who have found themselves in default—have options. All we have to do is make a decision to do something about it, and then, simply pick up the phone.

 

Read Anna’s Update to This Story Here

 

Anna Moreno lives in New York and also contributes to Bad Date Great Story.

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40 Comments / Post A Comment

LiarImeanLawyer (#4,267)

Just reading this brought me to the knife’s edge of panic. I have some ostrich tendencies myself. This spurred me to go check my now Sallie Mae administered federal loans, which I found out are in “disaster forbearance.” And the forbearance period is back dated to November. I was initially horrified, because I never asked for a forbearance. Some breathless googling revealed that I must have received a notice asking me if I (a NJ resident) wanted to opt OUT of the disaster forbearance that must have stemmed from the declaration of a federal disaster after Sandy. Obviously, I can’t be bothered to open my mail, let alone follow any instructions contained therein, so by DEFAULT (har, har), I am in forbearance until the end of July. Apparently, it took some time to process my passive entrance into this status.

My gut is to just leave it alone – it seems to have wiped away my past due amount and set my next scheduled payment for the amount recently adjusted to my re-enrollment in the IBR program. Could more prudent people kindly point out the probably obvious potential pitfalls for considering this a strange gift of circumstances, flown to me on the wings of bureaucracy and improvident obliviousness?

joyballz (#2,000)

@LiarImeanLawyer accruing interest would be my only caution

LookUponMyWorks (#2,616)

Wow. I admit to breaking into a nervous sweat just reading this. Perhaps I am at the opposite end of this spectrum – I couldn’t ignore my student loans even if I wanted to; I feel compelled to check them regularly online (yup, still there!) and throw an extra $50-500 at them as my finances allow.

Anna, I commend you for confronting your default. It’s remarkable, isn’t it, for how we let something grow and grow in our minds until it becomes some Lernaean Hydra. You thought you had no choice, but as you say it hasn’t been that bad. I really hope the consolidation goes through. If you’re willing/Logan and Mike are willing, could we get a follow up piece in a month or two?

bgprincipessa (#699)

@LookUponMyWorks seconded on the follow-up. and congrats to you Anna for finally taking that step!

When you first mentioned how much your loans were, I thought “Oh, that’s nothing!” – this is the problem with our society.

faustbanana (#2,376)

Sharon! What a gal.

joyballz (#2,000)

@faustbanana I wish Sharon worked at Comcast.

Renleigh (#2,110)

@faustbanana I know! I was expecting to her be some kind of evil robot and she was actually awesome! Such a wonderful twist.

keckersptq (#4,269)

This is so sad. Especially because economic hardship forbearance is such an easy thing to set up. I used that to put off my loan payment through a financially rough six (!!) year period. Now I’m on track to pay it off in another six years (I’ve got four times the author’s debt). DON’T DEFAULT PEOPLE!!

athens_baby (#2,527)

@keckersptq THANK YOU I came down here just to say that. I want to go back and finish the article, but it’s so. damn. easy. to go into forbearance! It definitely saved my hide (for years!) when I was struggling financially. When someone can’t even be bothered to look into it, I can’t feel that bad about the repercussions they suffer.

EmilyAnomaly (#4,238)

Really great article and I’m glad Anna had someone knowledgeable and kind to help her through the process. I was unemployed four years ago and the only job I could get was working as a debt collector. Some of my debt collector coworkers were pretty aggressive on the phone. I was very timid, which is why I didn’t last that long as a debt collector. How ironic that I was asking people to pay their bills when I was worried about how I was going to make rent. I would love to see a follow up from Anna to learn how it’s working out for her.

omicr_on (#4,271)

sigh. yeah, but what about private loans? i currently have a loan with Key Bank / Great Lakes (they love to trade off responsibility for talking to me) that they won’t let me lower or suspend the payment on AT ALL even though i’m unemployed and totally not able to make the payments. i asked them what would happen if i just stopped paying and they said
1. they’d bill me for the entire unpaid balance (lol)
and/or
2. they’d take it to my parents who co-signed (who also can’t afford to pay it)

does anyone know if there’s something else i can do in this situation? it’s horrible.

Bostonienne (#4,285)

@omicr_on I have a loan with them too (Key/Great Lakes) and they are DICKS. When I was super broke and trying to get back on track, I would talk to them all the time to try and work something out, and they were not only unhelpful but outright mean. The way the author says she worried about being berated for being irresponsible? Key would do that to me, and also wouldn’t work with me at all or alter my payments, even though they were set to something I just could not afford. My experience with the feds, like Anna’s, was really positive but with the private lenders it’s a whole different ballgame. The things they’ve threatened you with? I hate to say, but they’ll absolutely do because that’s exactly what they did to me. My parents were able to discharge the loans with Key they cosigned for me by settling with a smaller-than-total lump sum; it was still a notable chunk of change, but it was probably half if not less of what was owed plus it was one time and done. I’m hoping to do the same with the one I still hold independently of them, I just need to save up some more. The only downside to settling with the lender like that (other than scraping up the lump sum, which is no easy feat obviously) is you end up having to pay taxes on the portion of the loan you didn’t have to pay- it’s considered a gift or something.

Just let me say, as someone who can so strongly relate to your situation- hang in there. It can feel like you’re alone, but clearly there are LOTS of us who have been through this same shitty thing.

steponitvelma (#914)

Ugh, the timing on this is uncanny, as I was just staring in quiet horror at my student debt at 4 am this morning and promising myself I would never go out to eat or buy any clothes or books ever again. Of course, I’m in 7x more debt than the author is. . .

Dancercise (#94)

I’d love to see a follow up to this in a few months! Good luck, and thanks for sharing.

liznieve (#37)

it’s funny, I have found nearly everyone who works in debt management / collections for the department of ed to be unfailingly friendly, helpful, and even (dare I say) warm. I am sure they are trained to be that way so that we aren’t afraid to call. But really, don’t be afraid to call! There is no scolding, just some light hand holding.

anarchivist (#3,768)

Congrats on making these steps! I wish you the best of luck.

DarlingMagpie (#1,695)

Moral of the story: Don’t be like Anna.

sevanetta (#4,280)

No.

No.

This is not your fault.

Your system is broken.

Take it from someone outside your system… that system is insane. Selling your loans on? Insane fees just for not paying? Why is that ‘your fault’?

Sure, it’s your responsibility to pay back your original loans. But goddamn. No wonder you defaulted, no wonder so many do.

Good on you for wanting to sort it out, here’s to the day when it’s all paid off.

Bostonienne (#4,285)

@sevanetta So, while I absolutely agree with you that the system is majorly broken, and my mind boggles at why I was allowed to sign my name to 5-figure loan checks at 18 when I had no comprehension of what they would mean for my future, this may not be especially helpful for the author. I spent a lot of years not dealing with my student loans out of brokeness, fear, and anger about the system’s brokenness. And it wasn’t especially helpful. The system is shitty. The system needs to change. And the author absolutely shouldn’t beat herself up. But? Thinking of herself as the victim (as I did for a long, long time) is ultimately counterproductive. Regardless of the system, she’s here now and needs to make her way out. It sounds like she is working with the resources she’s got, which is great. Asking for help can be the scariest part.

theguvnah (#2,351)

@sevanetta Sure, the system is broken. But failing to pay your debt – even when you have money – nay, failing to EVEN OPEN YOUR BILLS – that makes it your fault.

Ana must take responsibility for her ridiculous immature behavior regarding financial matters. Period.

Great that they were able to help you, but they lied about one thing. You do NOT need to make payments while the consolidation paperwork is being processed. It should only take 60-90 days, it’s hard to make a mistake because the application is simple. Missing a voluntary payment does NOT jeopardize your ability to consolidate. Sure, it looks like they are helping but in truth they lied because they get a commission off of the voluntary payment. NO payment is required to consolidated. If it were me, I’d sue for misrepresenting – that’s a violation under the FDCPA. At least you’re working on getting out of default. Good luck.

Tammy (#7,624)

@TheStudentLoanLawyer I was recently informed of the Direct Loan Consolidation process as a means to get out of default and garnishment as well, but my application was cancelled. I was told they could not/would not consolidate a loan that was being garnished. That I would first have to rehabilitate then consolidate. Do you know if this was correct information?

Bostonienne (#4,285)

Girl. This is totally my story. With the exception of the fact that my wages were never garnished (which, in retrospect, I have no idea why they weren’t) this is exactly what happened to me. I went through the rehabilitation process, and have been back in good standing for about a year and a half now, for the first time in nearly my whole adult life. When I got the letter saying I was back in good standing, I cried. I also got a tax refund I was allowed to keep for the first time in years this year. There’s a light at the end of the tunnel!

shannowhamo (#845)

@Bostonienne This was my husband’s story, too (although he had a full time job for a while before they started garnishment) and sometimes he’d defer it but when he was younger (still old enough to know better) he was just kind of a money idiot. I just didn’t know how bad it had gotten until the garnishment started, I just sort of let him do his thing (or rather, not do anything) but I learned I have to take a more active role in our finances because despite my huge amount of consumer debt, I at least read stuff like The Billboard and am trying to be educated about these things! The final horrible joke of it all is that HE NEVER GRADUATED! He owes thousands of dollars for school he never finished and he’s had the salary that goes along with not being a college graduate (although he has worked his way up.)

thelovehater (#4,287)

Thank you for writing this. Up until Spring 2012, I paid on a plan that had been decided between myself and the lender. Unfortunately, I got sick and could not work anymore – the student loan payments were way down on the list of anything I was thinking of. The letters started for me around November along with the phone calls. (I had already done a consolidation way back when everyone was doing them to lower payments). I was told that I was out of deferments (apparently, you are given so many and I thought back to the two years after college when I was busy trying to find a job that related to the field I went to school for all the while working a really terrible retail job that only covered rent and food – I was out of deferments). Currently, my lender allowed me a medical forbearance but I know it isn’t forever and once I start working again – the bills + interest fees will still be waiting for me.

... (#4,289)

Thank god for online payments / communication. I have severe phone anxiety. I don’t even call my friends on the phone. I never order take-out or call anyone on the phone, ever, unless I absolutely have to do it. I don’t know if that’s common, or if I should go to therapy or what.

The best thing I’ve done about my federal student loans is apply for income-based repayment, which you do have to reapply for annually, but so far I haven’t had to pay anything back. (I’m barely earning over the federal poverty line.)

Mego (#4,529)

Anna, this post has been a talisman of hope for me the last month after many, many months of fear and avoidance. I finally made that call today to the Department of Ed. Jennifer, who took my call, was serious but informative and reassuring. I am wondering how things have turned out for you with the consolidation application. I am sending mine today. Thanks for sharing your story.

jquick (#3,730)

Off topic…found it interesting that you don’t think 10 minutes is a long hold time. I guess it’s a generational thing – I’m much older.

Susie (#5,227)

So what happened with your situation? Did you get out of default? I have a problem like this. I got a letter from a collection agency around the 15th of last month saying I owe around $9,000 and I have 30 days or something like that? I was not aware that they were even under default. I called the original loaner and said my loans were transferred to a diff loaner back in 2010. I don’t remember that even happening. So I called the current loaner and asked them about it. They said I had to talk to the collection agency to maybe set up a payment plan. There’s no way I can pay it all of at once. I’m not even working right now so I have no money coming in. Which is why I’m beyond stressed out and scared. I haven’t spoken to the collection agency yet. But I think they’ve called me a few times. I don’t recognize the number. Can anyone help me out with this? I seriously don’t know what to do.

M. E. (#5,344)

Wow! Same situation happened to me… it is terrifying dealing with all the aftermath…knowing that we are the only ones that can only take care of the mess we got into, no one else can. And I totally understand about making the first phone call, it was making me so distressed and anxious, that I would break out in sweats. It took me so long to have the courage to make that first phone call. I am glad I did… I am taking charge of the situation now.

I was reading your post, and everything sounds great, except that fact that the lady Sharon from the Collection Agency should not be doing this consolidation for you, if she truly is or even make you pay monthly “VOLUNTARY PAYMENTS”.

The information I received was that if you want to do the Rehabilition payment option it must be with the Collection Agency that has your student loans, then you do a Financial Statement with them and they will tell you your payment option and ask minimum paperwork they need to submit to the US Dept of EDU. Then you will placed in the 9mo- 10mo payment program to get out Default. After the 9mo then they will sell your loan to Gov agency so that you can either reapply to get into the ICR or IBR payment program. Second option is if you want to do the Consolidation option it must be done with Direct Loan Consolidation, its the only Government agency” that is dealing with all the Consolidation for “ALL” Federal student loans. It is very important that you don’t go to any other agency to consolidate your student loans, you will not have the Deferment, Forbearance and Hardship options. They don’t require to do monthly voluntary payments, and the entire process should be 60-90days. If I were you I would check my status for the consolidation with the agency itself. This is the website and phone number: Direct Loan Consolidation 800-557-7392. http://www.loanconsolidation.ed.gov There is a lot of scams that some companies are charging excessive amounts to consolidate your student loans when you can do it yourself for free thru Direct Loan Consolidation. Or there is other companies that will consolidate your student loans thru their own company, however, since they are not a government agency you will lose your options that US Dept of Education – Direct Loan Consolidation is able to provide for you.

Good luck to you and hope all goes well…

Havarah (#5,899)

Thank you so much for posting this. My federal loans are in default and I was just informed that they have been sent to a collection agency. Panic rules my life, constantly. Anxiety reigns. I am unable to pay them because I have been unemployed. I just recently found a job, and am starting to feel like a human again. I am SO THANKFUL that I found your post, because beyond it providing me with a bunch of advice and tips on how to start getting back on track, it also made me realize that I don’t have to feel like such a horrible person because of my defaulted loans. I am not an irresponsible scum bag. I am simply a college graduate in America who, like so many others, cannot get a job that pays me enough to survive and pay my debts. Thank you again, you have helped me tremendously.

Crisco (#6,348)

after randomly searching online for things about defaulting student loans i found this article. its crazy how close of a personality i had with her although i didn’t ignore my problem for nearly as long as her i still put my head in the sand and had a stack of letters (unopened) from the servicer of my federal student loans. i felt that if i didn’t open them i could blame mental ignorance of not knowing. i have around $100k total in student loans, some through the gov’t, sallie mae and some through AES and I was paying on all but the federal ones. When my grace period stopped it was about the time i was having to pay for my weddding so one month i had to pay for a part of catering so i told myself i would pay that and call the student loan company to work with them. every week i would write a to do list and put calling the loan company at the top of the list but kept pushing it back and back until a point where i was just too embarassed to call. this 1 month delay turned into 8 or 9 months very quickly…. then one day i built up enough mental courage and just called them to work things out. i’m on track now to get out of default and luckily get that off my record after 10 months. its just crazy how there is this tendency for people in our society to duck and hide. my advice for anyone in the same position is to just do it. if you need some motivation listen to Dave Ramsey’s radio show and listen to others who have paid off mountains of debt. he’s what is pushing me to plow through my huge pile of student loans

This may be a silly question….I did completely read you post…but just to make sure I understand, after your loans are considered rehabilitated, are you able to take out more student loans or no?

Furby (#6,735)

@Alisha Perry@facebook YES, and YES. I was in default; did the consolidation. Long story short, now I’m a 32 year old sophomore in college (again – I didn’t finish the first time, which led to the default in the first place).

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Collette (#6,898)

I was delinquent so many times, but thank goodness I never got to the point of wage garnishment. I just got into the student forgiveness program. If anyone wants help in getting into the student loan forgiveness program, you can get a guide at http://governmentstudentloanforgiveness.com

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