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information about the dept. of education


xena0608
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Has anybody ever negotiated witht he department of education once their wages were garnished for student loan default?... how do you go about it?

What are you trying to negotiate?? A settlement? You cannot negotiate to get out of the garnishment. The only things that will stop the garnishment would be, paying off the loan, terminationn of employment, consolidation or completing a rehab program. Rehab would involve you making 12 payments over and above your garnishment.

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  • 2 months later...

I actually contacted them in reference to rehabbing the loan... they said I had to pay half of the loan in full.. that would be $5000 upfront... If I had $5000 laying around the house... I probably wouldn't be getting my wages garnished in the first place... Is this how the rehab really works?... Any information would be appreciated!...

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I actually contacted them in reference to rehabbing the loan... they said I had to pay half of the loan in full.. that would be $5000 upfront... If I had $5000 laying around the house... I probably wouldn't be getting my wages garnished in the first place... Is this how the rehab really works?... Any information would be appreciated!...

http://www.ed.gov/offices/OSFAP/DCS/rehabilitation.html

This is from the Department of ed site.

Loan Rehabilitation

You may also be interested in participating in the loan rehabilitation program. After you have made 12 consecutive monthly payments that are both reasonable and affordable, we will agree to reinsure the loan. You will then be eligible to have the loan purchased by a lending institution. Once a loan is rehabilitated, it will be taken out of default, the credit bureau reports made by the servicing agency will be deleted, you will be able to repay the loan over a 9 year period, and you will again be eligible for additional Title IV student financial aid funds.

The following is from the Higher Education act which governs Rehabs.

The Higher Education Act of 1965 and the 1998 amendments clearly states the required statutes of this Act. Below is a portion of the importance to this statute. Those affected with improperly listed student loans should print that portion out and send a demand letter to both the previous lender who refuses to remove it and the dept. of education along with a copy to Gail McLarnon, Program Specialist, Program Development Division, Office of Student Financial Assistance, 400 Maryland Avenue, SW, ROB-3, Room 3045, Washington, D.C. 20202-5449.

Section 674.39 Loan Rehabilitation

We believe it is helpful to review the aspects of loan rehabilitation that relate to borrower benefits and institutional responsibilities that are required by law, and therefore cannot be changed. Under the 1998 Amendments, a defaulted loan is considered rehabilitated if the borrower of a loan made under this part who has defaulted on the loan'' makes the required 12 payments. Accordingly, loan rehabilitation is available to all defaulted borrowers with a loan. If a borrower requests loan rehabilitation, the institution or its servicer must allow the borrower to rehabilitate his or her loan. This also applies to defaulted loans that an institution has placed with a collection agency. However, the borrower may only rehabilitate a defaulted loan once. Because the statute specifically refers to a stream of 12 payments as determined by the institution, the institution must work with the borrower to determine a payment amount that is appropriate.

The statute does not require a signed rehabilitation agreement. In accordance with the 1998 Amendments, once the loan is rehabilitated (after the 12th payment has been made), the institution or its servicer must request that any credit bureau to which the defaulted loan was reported remove the default from the borrower's borrower's credit history. The borrower is brought current and is no longer considered to be delinquent or in default. Removing the default is consistent with the requirements of the Fair Credit Reporting Act (FCRA), which requires that an institution correct and update the information it furnishes to a credit reporting agency. In this case, the institution would be updating the borrower's credit history to reflect the rehabilitation of the loan. The FCRA also requires credit reporting agencies to have reasonable procedures in place to accept updated or corrected information.

Once the loan is rehabilitated, the borrower is subject to the terms, conditions, benefits and privileges of the borrower's original promissory note. This includes eligibility for deferments, forbearance, cancellations, and flexible repayment options. The borrower is also subject to the same responsibilities under the note, which include, but are not limited to, making regular payments and informing the school or servicer of an address change or the need for flexible repayment arrangements. We sum up this status by saying the borrower is returned to regular repayment status in Sec. 674.39(B)(1) of the regulations. Finally, in accordance with the 1998 Amendments, a borrower who has rehabilitated his or her loan re-establishes eligibility for Title IV student financial assistance, as long as the borrower is otherwise eligible.

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Lynn thank you so much for your reply... the problem I am having with PHEAA (Pennsylvania Higher Education and Assistance Agency) is that they will rehabilitate the loan... (approx $9500.00 left on the loan); but their rehabilitation program (as per the person i spoke to from PHEAA on the phone) requires me to pay half of the balance now... and then they will accept 12 payments before making the loan current... That was the whole issue that I had... I am currently paying $250.00 per month on wage garnishment... which to me is reasonable on this loan... and I've already paid $1000 since december 04... How am I supposed to come up with almost $5000 to rehabilitate the loan?... Are they trying to jerk me around by asking for this exorbitant amount of money... HELP... :o

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Lynn thank you so much for your reply... the problem I am having with PHEAA (Pennsylvania Higher Education and Assistance Agency) is that they will rehabilitate the loan... (approx $9500.00 left on the loan); but their rehabilitation program (as per the person i spoke to from PHEAA on the phone) requires me to pay half of the balance now...

This is total BS!!! Nowhere in the Higher Education Act does it state that you have to make any downpayment!! Is this the CA asking for the downpayment??

and then they will accept 12 payments before making the loan current... That was the whole issue that I had... I am currently paying $250.00 per month on wage garnishment... which to me is reasonable on this loan... and I've already paid $1000 since december 04... How am I supposed to come up with almost $5000 to rehabilitate the loan?... Are they trying to jerk me around by asking for this exorbitant amount of money... HELP... :o

Since you are being garnished, to qualify for rehab you must make voluntary ontime payments over and above the garnishment. For your balance that would be about $100/month. Call them back and tell them that you know your rights!! If this doesnt work, contact PHEAA directly. If that doesnt work, contact the student loan ombudsman!!

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