9 year old student loan??? What to do...

[onlybrad]

This collection company is calling my friend that owes $9000 on a student loan from 9years ago. They are telling her the fill out an income and expense form and fax it to them so they can see how much her and her husband can afford to pay them each month. She also said she is going to have to pay $125 or $150 for so many months to reinstate the debt.

I told her this sounds kinda fishy and I don't think a debt can legally be collected on past 4-5years depending on your state. She is in Texas, btw. Also they are treating to take her to court and make her pay the full amount if she doesn't state sending in payments... Plus she said they will start reocurring the interest rates as well.

What are her options?

B

[thomassl]

Intially, I would ask her to get a recent copy of her credit reports to make sure about the loan amounts and last date of activity. I would refrain from sending them anything until I check this. Once a payment is made on a delinquent account, it renews the actvitity date whereby pushing the date further. For this reason, many people just leave a overdue debt alone if it's close to the 7-year mark. It is possible to negociate with the balance due, however, you must remember that any amount leaving more than a $600 balance will be sent to the IRS as income on a 1099. Default information concerning U.S. Government insured or guaranteed student loans can be reported for seven years after certain guarantor actions. There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place.

With regard to any delinquent account placed for collection-internally or by referral to a third-party debt collector, whichever is earlier-charged to profit and loss, or subjected to any similar action, the seven-year period is calculated from the date of the delinquency that occurred immediately before the collection activity, charge to profit and loss, or similar action. For example, assume that your payments on a loan were late in January, but that you caught up in February. You were late again in May, but caught up in July. You were again late in September, but did not catch up before the account was turned over to a collection agency in December. You made no more payments on the account, and it is charged to profit and loss in July of the following year.

Under the FCRA, the January and May late payments each can be reported for seven years. The collection activity and the charge to profit and loss can be reported for seven years from the date of the September payment, which was the delinquency that occurred immediately before those activities. Once she gets all her reports and review them, she can then see what's "fishy" and go from there. There are many collection agencies who pick up old accounts for pennies on the dollar to try to see if they can recover them knowing the general public isn't as educated in these kinds of practices.

[newbie7069]

I would do some reading in the Student Loan forum. I personally don't have any exp with one, but I'm pretty sure I remember from reading other posts that there is NO SOL on a student loan....especially if its federal.

Someone else may want to chime in.

[direred]

This collection company is calling my friend that owes $9000 on a student loan from 9years ago. They are telling her the fill out an income and expense form and fax it to them so they can see how much her and her husband can afford to pay them each month. She also said she is going to have to pay $125 or $150 for so many months to reinstate the debt.

I told her this sounds kinda fishy and I don't think a debt can legally be collected on past 4-5years depending on your state. She is in Texas, btw. Also they are treating to take her to court and make her pay the full amount if she doesn't state sending in payments... Plus she said they will start reocurring the interest rates as well.

There is NO SOL on a government-backed student loan. If she enters rehab, I think the payments are around 1% of principal, but there may be a minimum and there are other constraints.

LynnInMN is the person who knows pretty much everything there is to know about this sort of thing -- posting in the student loan forum will get her attention.

[onlybrad]

Thanks

[Recovering Attorney]

One thing you do NOT want to do is ignore a collector on a student loan. There is no SOL, really, they can garnish your wages without going to court, you cannot discharge it in BK, you are generally an indentured servant. And the interest and collection fees are soooooo heavy and mom-negotiable. I would try to rehab it, definitely go w ith teh "how much you can afford route. The US Education Dept or Sallie Mae has great info on how to do all this. LynnMN knows a lot, too.

[LynnInMN]

Sorry guys, havent been around much! I finally opened a store last month and I have been pretty well living there!!

Recovering Attorney...you hit it on the head! No SOL on government student loans period. Rehabs are a great option. 9 payments to qualify although sometimes it does require a 10th payment. The CA can demand a financial statement with paystubbs to set payments...it all comes under reasonable and affordable payments. We were required by several of of clients to get paystubbs and proof of extra ordinary expenses.