Sketchy Situation Regarding School and their Loan

[victory_records]

Here's my situation:

-----------------------------------------------------------

Aug 1st 2004

When I was 19, my mother applied for a a Sallie Mae Federal Plus Loan. The school I was attending was located in Massachusetts.

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Aug 30th 2004

We got a letter from Sallie Mae saying:

"We regret to inform you that we cannot grant your request for a PLUS loan.

[standard text indicating how I can reapply for the loan]

Notice: Because your request for a Federal PLUS Loan was

denied, your son or daughter may now qualify for additional

financial aid through his or her college or university.

The financial aid professional at your student's school can

advise you about eligibility when you provide a copy of

this letter.

Sincerely

Loan Origination Department"

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Sept 1st 2004

I went to the student accounts/financial aid office to discuss this. Instead of offering me any financial aid, they requested that I sign a "Short Term Promissory Note" between the School and I.

The 1-page promissory note looks like this:

"I [Maker] promise to pay to the order of Trustees of [university],

in full on or before Sept 17 2004, the sum of $16,750.46,

plus interest from Aug 1st 2004 at a rate of 1% per month (12% per year).

Payments are due and payable as follows:

Date Amount

--------------------------

Sept 17, 2004 Balance in full

It is hereby expressly agreed that upon default of payment

of any one of said installments, which default shall extend

over a period of more then ten (10) days, then all subsequent

installments on this note, with interest shall at once become

due and payable at the option of the legal holder, and the

registration of the maker will be subject to immediate

cancellation thereof without demand or notice, demand and

notice being hereby expressly waived. The makers, endorsers

and all guarantors of this note severally waive demand,

protest and presentation for payment and notice of non-payment

and protest, and also waive any and all defenses on the ground

of any extensions or partial payment which may be granted or

accepted by the holder before or after the maturity of this

note or any part thereof. In addition, I promise to pay all

of the attorney's fees and other reasonable collection costs

and charges necessary for the collection of any amount not

paid when due.

[signatures]

-----------------------------------------------------------

Today

Due to personal reasons and severe depression, I failed out that semester. I ended up getting a low-wage job in Massachusetts (actually somewhere near the school), and here I stand today. I never made any attempts to pay the balance. I got a letter recently from a Debt Collector saying that I owe them $31,392.07 for the University, which I clearly cannot pay. I have scoured everywhere for recourses, and I'm just at a complete loss of what to do. All in all, I'm just a 23 uneducated idiot trying to get back on his feet. Please help.

My questions are thus:

1) A professor from MIT told me that School's cannot legally request a 19 year old to sign a "Short Term Promissory Note" to pay for college when he is considered a dependent of his parents. Is this true? Is this something that is stated in the Higher Education Act or by the US Department of Education?

2) Is anybody aware of similar previous cases such as mine and how did they handle it? What was the outcome?

3) What ARE my recourses?

4) Do I have a defense of any nature?

5) Is it possible to use anything for maybe even negotiations? Possibly to reduce the entire amount to something substantially less?

6) Please add any other advice that you can.

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[Amerikaner83]

I'm not sure but I'll bump this thread for you. Maybe those in the know will see it. Lynn Clark, i believe her name is, comes to mind. FinAid advisor for schools...posts here occasionally

[CleverCynic]

that's a mess dude. I could have given you some advice in 2004 when all this was happening, but man $16k + was never going to happen, there really wasn't any point in signing it. I assume this was a private university, the only thing you could/should have done was go to a state school when you were denied the necessary funding.

Normally you would try to rehab the loan so you could return to school and then get a deferment, but a private loan from the university directly is going to limit your options... doesn't really even seem like it was a loan, just a payment pay-as-you-go plan.

If it's not an educational loan governed by those laws, you are open for BK, but without some financial help this is going to sting for a while.

[LynnInMN]

My questions are thus:

1) A professor from MIT told me that School's cannot legally request a 19 year old to sign a "Short Term Promissory Note" to pay for college when he is considered a dependent of his parents. Is this true? Is this something that is stated in the Higher Education Act or by the US Department of Education?

An MIT professor is not a financial professional. And yes a 19 year old is legally an adult...actually for the purposes of financial aid, there is no age of minority. It is an invalid defense.

2) Is anybody aware of similar previous cases such as mine and how did they handle it? What was the outcome?

See above.

3) What ARE my recourses?

None.

4) Do I have a defense of any nature?

No.

5) Is it possible to use anything for maybe even negotiations? Possibly to reduce the entire amount to something substantially less?

They probably would negotiate a settlement but you would have to pay it off in one shot, not via payments.

6) Please add any other advice that you can.

From what I read, you are in a mess. Being a loan to a school would make it non dischargable under the BK laws. Question....were you suppose to get other Finanical aid to offset this loan?? I know we did short term loans but that was to cover pending loans in the works. Being turned down for the Plus Loan would have made you eligible for up to an additional $4k in stafford unsub loans. Did you get any of these??

[PolarBearnCO]

Yikes! $16K for a single semester? My entire college degree didn't cost that much.

If you ever want to go back to school... University of Wyoming is less than $3K per year for tuition, for residents. Simply live there for a year and you are a resident. You can even go to school as a non-resident while working toward residency. That's one of the cheapest quality 4-yr schools I have ever found.

Their Geophysics dept used to be rated in the top 5 of the country for Master's work.

[victory_records]

Lynn

1) You stated, "And yes a 19 year old is legally an adult...actually for the purposes of financial aid, there is no age of minority. It is an invalid defense."

Just for future reference, How is it possible to be considered a Minor/Dependent when you fill out the FAFSA, AND when filing your tax returns as a student/dependent but then NOT a dependent/minority when the school requests you to sign a legally binding agreement. Is this to say that the US Government can conveniently choose when you are a Minor/Dependent and when you are a Major/Adult?

2) You stated, "I know we did short term loans but that was to cover pending loans in the works."

Have you ever come across a situation where those pending loans did NOT come through, as in, the student was repeatedly denied the PLUS loan and the student had already signed the short-term promissory note with the school? In that case, did you just end up kicking the student out? How did you (as in the school since they are the creditor) force him to pay the value of the short-term promissory note? What if he didn't or was unable to pay the value of the short-term promissory note? Even if you offered him the $4k stafford unsubsidized loan, what if that wasn't able to cover the entire cost of the school? Then what? Burn him at the stake? (Forgive me for the crass remark)

3) You stated, "Being turned down for the Plus Loan would have made you eligible for up to an additional $4k in stafford unsub loans. Did you get any of these??"

I did not get an additional $4k in Stafford Unsubsidized Loan. Would I have been eligible for any other financial aid? Would I have been eligible for any kind of Financial Grant?

Victory_Records (I should change my name to Defeated_Records)

[LynnInMN]

Lynn

1) You stated, "And yes a 19 year old is legally an adult...actually for the purposes of financial aid, there is no age of minority. It is an invalid defense."

Just for future reference, How is it possible to be considered a Minor/Dependent when you fill out the FAFSA, AND when filing your tax returns as a student/dependent but then NOT a dependent/minority when the school requests you to sign a legally binding agreement. Is this to say that the US Government can conveniently choose when you are a Minor/Dependent and when you are a Major/Adult?

You are confusing tax law with with contract law and financial aid rules and regs. FA has always been based off parents income. However contract law states that you can legally enter into a contract at age 18. In certain circumstances a minor can be held legally responsible for debts for "nessities" like housing and food. Since a student loan is for the express benefit student, age of minority is not a legal defense.

2) You stated, "I know we did short term loans but that was to cover pending loans in the works."

Have you ever come across a situation where those pending loans did NOT come through, as in, the student was repeatedly denied the PLUS loan and the student had already signed the short-term promissory note with the school? In that case, did you just end up kicking the student out?

Yup. Tuition would be prorated and credited to the student account. Balance of account would then become due in full immediately. It came down to "you cant pay, you cant stay."

How did you (as in the school since they are the creditor) force him to pay the value of the short-term promissory note? What if he didn't or was unable to pay the value of the short-term promissory note? Even if you offered him the $4k stafford unsubsidized loan, what if that wasn't able to cover the entire cost of the school? Then what? Burn him at the stake? (Forgive me for the crass remark)

Well I worked for a state university and if they didnt pay, we let the state collect it. Private schools generally will sue.

3) You stated, "Being turned down for the Plus Loan would have made you eligible for up to an additional $4k in stafford unsub loans. Did you get any of these??"

I did not get an additional $4k in Stafford Unsubsidized Loan. Would I have been eligible for any other financial aid? Would I have been eligible for any kind of Financial Grant?

Victory_Records (I should change my name to Defeated_Records)

What I dont understand is that you signed a prom note for $16k, with the balance due in full six weeks later. It was a short term loan. What other aid did you have coming in to offset this?? Did you ask the FA officer if you were eligible for more federal loans or even private loans?? Since they awarded you PLUS funds, I have to assume that you maybe got a stafford?? If so, what is the status of that loan?? You had six weeks to come up with $16k...did it not come to mind that maybe you should not attend or drop out quickly to minimize your cost since you could not come up with the money??

[CleverCynic]

This is your only course of action, otherwise this hiccup is going to dictate the quality of your life for the rest of your life:

Start completely over at a community college and pay for the courses yourself while you work (do not request transcripts from anywhere other than your high school). Get a 2 year degree. Rehab the stafford portions of your loans if/when you go to a STATE university, so you can get them deferred and possibly some new ones.

Major in something profitable. Graduate. Pay your old school.

Good luck.

[let_it_slide]

Yikes! $16K for a single semester? My entire college degree didn't cost that much.

If you ever want to go back to school... University of Wyoming is less than $3K per year for tuition, for residents. Simply live there for a year and you are a resident. You can even go to school as a non-resident while working toward residency. That's one of the cheapest quality 4-yr schools I have ever found.

Their Geophysics dept used to be rated in the top 5 of the country for Master's work.

Weird that you mention geophysics master's work... that's my field too! I was actually considering Wyoming but I don't know if I can deal with the winters, heh.

As for the original poster... have you talked to a new financial aid counselor at a school? Sometimes they are helpful in situations like these. At least if you go to school again you might be able to get the payments deferred until you graduate with a better degree.

[victory_records]

Lynn

1) You said, "What other aid did you have coming in to offset this?? Did you ask the FA officer if you were eligible for more federal loans or even private loans??"

No other loans were coming in to offset this. Sallie Mae and the university said I should just reapply for the loan because their have been cases in the past where a loan was denied by mistake. The University said that in the mean time, I should just sign this short term promissory note. Which I did. I never asked them if I was eligible for more aid. I didn't even know you could ask such a question. If I were eligible for more aid, and they saw my odd predicament, why didn't they offer more aid? I'm assuming that schools legitimately want to help you.

2) You said, "Since they awarded you PLUS funds, I have to assume that you maybe got a stafford?? If so, what is the status of that loan??"

I'm not sure where you read that I was awarded PLUS loans. They didn't award me ANY plus loans. They didn't offer me ANYTHING. Not even Stafford. We were APPLYING for the PLUS loan, but we were never approved.

3) You said, "You had six weeks to come up with $16k...did it not come to mind that maybe you should not attend or drop out quickly to minimize your cost since you could not come up with the money??"

No, that did not come to mind. I was going onto my 3rd Year of School at that time. How could I have thought such a thing? I was a Junior at a really good private university. I would only have had one more year after that. I was almost done; I was so close. Since I was going onto my 3rd year, I would assume that the University would have been more forgiving. Instead of treating me like a good student with good grades from the previous semesters who was in need of serious help, they treated me like an ignorant businessman.

I'm not saying the university was purposefully being despiteful. However, I do question what they were thinking at the time. Here's a case of a good student going on his 3rd year, who is in serious need of financial help, and yet their only advice was to have me sign a short-term promissory note and then reapply for the PLUS loan?

Oddly enough, I DID end up becoming a drop out (severe case of clinical depression) and currently earn minimum wage. I'm not trying to turn this into a sob story. In fact, I myself don't like sob stories. I just want to know what my recourses are, and from what has been stated, it appears that I really don't have any kind of a recourse. As of right now, I see that I can either a) prostitute myself, sell drugs, c) run away. Forgive me for the latter comment, it was rather crass, but I meant to say it.

If anybody else on the forums knows of a good lawyer in the Massachusetts area who would be willing to help me out pro-bono or very cheap, I would certainly appreciate their contact number through a private message. If anybody knows of an alternative to my mess, then please speak up or send me a private message.

Lynn, thank you for taking the time to read this and discuss this. If you somehow manage to dig up any other information regarding situations like these, please send a private message to me or post it on the forums.

Thank you

;Victory_Records

[LynnInMN]

Lynn

1) You said, "What other aid did you have coming in to offset this?? Did you ask the FA officer if you were eligible for more federal loans or even private loans??"

No other loans were coming in to offset this. Sallie Mae and the university said I should just reapply for the loan because their have been cases in the past where a loan was denied by mistake. The University said that in the mean time, I should just sign this short term promissory note. Which I did. I never asked them if I was eligible for more aid. I didn't even know you could ask such a question. If I were eligible for more aid, and they saw my odd predicament, why didn't they offer more aid? I'm assuming that schools legitimately want to help you.

2) You said, "Since they awarded you PLUS funds, I have to assume that you maybe got a stafford?? If so, what is the status of that loan??"

I'm not sure where you read that I was awarded PLUS loans. They didn't award me ANY plus loans. They didn't offer me ANYTHING. Not even Stafford. We were APPLYING for the PLUS loan, but we were never approved.

.......In order to apply for a PLUS loan, you have to awarded it via a FAFSA. A PLUS loan is part of federal aid.

3) You said, "You had six weeks to come up with $16k...did it not come to mind that maybe you should not attend or drop out quickly to minimize your cost since you could not come up with the money??"

No, that did not come to mind. I was going onto my 3rd Year of School at that time. How could I have thought such a thing? I was a Junior at a really good private university. I would only have had one more year after that. I was almost done; I was so close. Since I was going onto my 3rd year, I would assume that the University would have been more forgiving. Instead of treating me like a good student with good grades from the previous semesters who was in need of serious help, they treated me like an ignorant businessman.

....Schools are businesses. You borrowed funds that were short term. How did you pay in previous years???

I'm not saying the university was purposefully being despiteful. However, I do question what they were thinking at the time. Here's a case of a good student going on his 3rd year, who is in serious need of financial help, and yet their only advice was to have me sign a short-term promissory note and then reapply for the PLUS loan?

Oddly enough, I DID end up becoming a drop out (severe case of clinical depression) and currently earn minimum wage. I'm not trying to turn this into a sob story. In fact, I myself don't like sob stories. I just want to know what my recourses are, and from what has been stated, it appears that I really don't have any kind of a recourse. As of right now, I see that I can either a) prostitute myself, sell drugs, c) run away. Forgive me for the latter comment, it was rather crass, but I meant to say it.

If anybody else on the forums knows of a good lawyer in the Massachusetts area who would be willing to help me out pro-bono or very cheap, I would certainly appreciate their contact number through a private message. If anybody knows of an alternative to my mess, then please speak up or send me a private message.

Lynn, thank you for taking the time to read this and discuss this. If you somehow manage to dig up any other information regarding situations like these, please send a private message to me or post it on the forums.

Thank you

;Victory_Records

Unfortunately you do not have ANY case. They have a prom note which is iron clad. You signed it.

[CleverCynic]

The new information here is that you were going into your 3rd year. So what we'd need to know now is:

1) Same school the entire time?

2) When you filled out your FAFSA online, what was your EFC (Expected Family Contribution) for each of the 3 years?

3) How were the first 2 years paid for?

4) Basically, what changed?

Usually the stafford loans you are eligible for are less the first 2 years than the last two. You should have been eligible for the Pell Grant (4K) and both subsidized and unsubsidized staffford loans (10.5k) for a total of 14.5k, (all of this NON-credit based) plus whatever local grants and tuition offsets they offer in your state. This should have brought you close, and without a PLUS loan. The PLUS should have only been necessary to cover the smaller amount left for tuition plus room and board if you were staying on campus, but other arrangements could have been made without the PLUS.

http://www.staffordloan.com/stafford-loan-info/undergraduate-stafford-loan.php

All this assumes your EFC was 0, that your parents were not required to pay anything towards tuition outside of loans. If they made decent money, then they were supposed to pay the amount of EFC, usually by check or on a payment plan, or as a private loan they would obtain if they didn't want to part with the earnings or had some other more pressing obligation.