How do I clear up old defaults?

Without going into too much detail, here's my situation. Sometime in
the early 1990s, I defaulted on two student loans. One was a loan I
had taken out in California in the late 1970s, and the other a loan in
New Mexico in the late 1980s. In 2001, I telephoned the New Mexico
Student Loan Guarantee Corporation and asked about my repayment
options. The woman I talked to took my name, telephone and social
security numbers, and so on. After a brief computer search, she told
me that my account had been referred to a collection agency and that I
would have to speak to them. (I did not call the agency, largely
because of what I had read in the Student Loan section of Bud Hibbs'
online book.) Within perhaps a month, I started getting calls from
collection agencies. That has continued to the present, with lulls
here and there as collectors have tossed my account back and forth (I
have never spoken or corresponded with any of them). I am self-
employed and have thereby avoided wage garnishment and, for the most
part, tax refund offsets. I have documentation of my New Mexico loans
but not of my California loans. I have reams of collection agency
documents with figures I cannot fathom or verify and in any case do
not trust.

Basically, I want to rehabilitate my loans to get them out of
default. As near as I can tell, my loans totaled about $17,000. With
interest, fees, etc., I now owe about twice that. My biggest fear is
that if I deal with a collection agency, I'll end up owing and paying
considerably more.

Questions:

1. Is there any chance that I can avoid collection agencies and deal
with the lender directly?

2. I'm assuming that the Department of Education is the party I owe.
In anyone's experience, is it possible to negotiate a settlement with
them?

3. Is it advisable to do this through an attorney? If so, does
anyone know of one (or anyone else) who does that sort of thing?

Thanks,

jay rea

Hi Jay... your story is not uncommon. I have placed my answers below

On Tue, 22 Jan 2008 18:35:00 -0800 (PST), jay rea <karnut2005.TakeThisOut@yahoo.com> wrote:

Without going into too much detail, here's my situation. Sometime in he early 1990s, I defaulted on two student loans. One was a loan I had taken
out in California in the late 1970s, and the other a loan in New Mexico in the late 1980s. In 2001, I telephoned the New Mexico Student Loan
Guarantee Corporation and asked about my repayment options. The woman I talked to took my name, telephone and social security numbers, and so on.
After a brief computer search, she told me that my account had been referred to a collection agency and that I would have to speak to them. (I did
not call the agency, largely because of what I had read in the Student Loan section of Bud Hibbs' online book.) Within perhaps a month, I started
gtting calls from collection agencies. That has continued to the present, with lulls here and there as collectors have tossed my account back and
forth (I have never spoken or corresponded with any of them). I am self-employed and have thereby avoided wage garnishment and, for the most
part, tax refund offsets. I have documentation of my New Mexico loans but not of my California loans. I have reams of collection agency documents
with figures I cannot fathom or verify and in any case do not trust.

Basically, I want to rehabilitate my loans to get them out of default. As near as I can tell, my loans totaled about $17,000. With interest, fees,
etc., I now owe about twice that. My biggest fear is that if I deal with a collection agency, I'll end up owing and paying considerably more.

Questions:

1. Is there any chance that I can avoid collection agencies and deal with the lender directly?
No. You need to deal directly with your current loan holder or its agent first. To rehabilitate your defaulted repayment agreement, you need to make
12 consecutive on-time, reasonable and affordable, monthly payments prior to dealing with the lender. The advice from people not to deal with
collection agencies regarding your student loan, is just bad advice. Collection agents are incented to offer rehabilitation than demand payment in
full... but you will have to jump through some hoops that demonstrates your ability to pay and defines "reasonable and affordable" monthly payments; a
right you have under statute

2. I'm assuming that the Department of Education is the party I owe. In anyone's experience, is it possible to negotiate a settlement with
them?
The Guaranty Agency and ED will settle - but there are not set guidelines between the two. It depends on how well they can verify what your true
ability to pay is - which you need to demonstrate. But you will have to come up with all the cash at once. Remember if your ability to pay is the
entire amount - that is what will be expected.

3. Is it advisable to do this through an attorney? If so, does anyone know of one (or anyone else) who does that sort of thing?
If you want to waste your time and money obtaining representation when all you need to do is pick up the phone and call someone... go ahead. By
obtaining legal representation, you will communicate to the collection agent and ED that you have more money than you claim and it will reduce ED's
consideration to accept a settlement.

Thanks,
YW, I hope this helps... One More thing... Your self employment status could be affected by these loans. Many states are now revoking licensing
rights until you agree to pay the balance of the debt (or pay it in full depending on the state and the license) You probably do not contract with
the federal government but you could be automatically "debarred" from participating in federal contracts. If you are not self employed and work for
a company that contracts with a state or federal entity, you could jeopardize the contract of the company you work for.

Remember - I use the word "could" because I do not know your particulars to give you any kind of certainty

jay rea
Bravejoe

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"That's my opinion. I could be wrong." Dennis Miller
"It Doesn't Matter!" Bravejoe

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