Is a collection agency calling about your defaulted student loan?

If  I defaulted on my student loans for an extended period of time, chances are the Department of Education will sell my loan to a collection agency. When that happens, you won’t be able to make any payments to the Department of Education, only to the collection agency. As too many people have learned the hard way, the tactics utilized by these agencies to collect debts are unscrupulous and their fees are high. If you’re currently dealing with a collection agency, you are far from helpless. You have rights and you have help you can use to get out from under its thumb.

The government does very little to police or oversee the activities of the collection agencies it uses. Thus, some collection agencies feel free to use morally reprehensible and even borderline illegal methods when attempting to collect on debts, such as:

• Using intentionally confusing or misleading documents or demands to solicit personal information from you.
• Determining how much you must pay without any input from you whatsoever. Often, the payment amount is established without any consideration of your current financial hardships.
• Misrepresenting themselves as being part of a governmental agency.

Remember your rights!

• You have the right to privacy.
• Collection agencies are not authorized to provide your information to any third party.
• If you have legal representation, a collection agency is only permitted to communicate with your attorney or law firm.
• Harassing phone calls or attempts at communication with you during odd hours, such as late at night, are forbidden.
• A collection agency has no right to accost you at your place of employment.
• You are protected from stalking and/or persecution.
• Collection agencies are not permitted to intimidate you or abuse their power in any way. Actions like this are in clear violation of the law and you should report them immediately.
• Collection agency employees and their outside contractors must not impersonate anyone else in order to gain information from you. They must clearly identify who they are and state their intentions.

When dealing with collection agencies for defaulted student loans, you have more than rights. You have help.

The first source of help is the Department of Education itself. Re-establish contact with your Federal loan service (not the collection agency) and state that you want to rehabilitate your loan(s). Often, you will have to make your case for loan rehabilitation by providing your financial records, including pay stubs, tax returns, monthly and annual bills, among other documents. The loan rehabilitation process usually takes around 10 months during which you must make monthly payments on time every month, no exceptions, in the amount dictated by the Department. After you have successfully completed this process, your loan status will be restored and you will regain several lost privileges, like loan deferment.

Your second source of help is a private debt consolidation or loan servicing organization that specializes in defaulted student loans. Such a group will keep the collection agencies off your back and help you establish a reasonable repayment plan. The payments will be lower than your original loan payment amount, extended over a longer period of time, and you will lose some Federally-based privileges. But you’ll be free from the stress of harassing phone calls and letters, and better able to honor your debt and restore your credit rating. Sounds like a win-win situation.