30 year old school debt- Can They Collect

[Tsandy7]

Hello, team I am asking this question for a friend who is having problems with a thirty year old school debt, this debt is through the U.S. department of Health Education and welfare. The problem is that I will call him William,. The amount advanced was $700.00, he paid $428.00 of this debt, which left a balance of $272.00. William stated that this bill was paid in full. American is trying to collect 1, 298.00

Here is how it is set up: Principal $272.00 / Interest: $ 511.00 / Costs: $515.00? Amt owed $1,298.00

He gets a letter in the mail June 30, 2008 from a company called American Collection; on the attached letter it states their client is Ohio Northern University. He sent a dispute letter and American sent back a student promissory note, however I did not see anything with his signature on it. If this is legit, he does not mind paying the principal and interest, if it is a legit government loan. however he cannot understand and neither can I what the Costs entail for American Collection systems to charge ($515.00) ?

As a matter of fact he was going to get a loan and give them the whole amount; I told him he needs to check this out. Can someone from this wonderful site give some advice?

Tsandy7

[Debt Guy]

Federal student loans never expire. Yes, it can be collected.

Most loan agreements provide for recovery of principal, accrued interest and costs. The fee to the collection agency may or may not be eligible as a cost. It would take a great deal of research to determine -- you would need to review state statutes and the federal education statutes.

Your friends choices are to pay or not pay. Failure to pay could result in a seizure of a federal tax refund. It is pretty hard to argue with that kind of power.

Did your friend go to school at the named institution? Has he called the institution to inquire? If not, why not?

A strategy might be to call the institution, be humble, explain he never knew he owed money, offer to pay in full if they will recall the debt from the collection agency. They might go for it.

Alternatively, go to the CA and make an offer to settle the debt.

[kydraftsman73]

In all of 30 years and the government never seized a tax refund to collect on the balance due. Sounds fishy to me, I'd do alot of research into that collection agency and contact the federal agency that the loan was through to check it's status.

[kydraftsman73]

Oh btw this wouldn't happen to be American Credit Collections would it. If it is go and read about them on budhibbs.com

[Tsandy7]

Thanks for all the replies, this is the most wonderful site.

We will try this:

A strategy might be to call the institution, be humble, explain he never knew he owed money, offer to pay in full if they will recall the debt from the collection agency. They might go for it.

Alternatively, go to the CA and make an offer to settle the debt.

Today 12:42 AM

Tsandy says: I will have William to do this, he has no problem paying, We want to make sure everything is legit, It was only for a couple of hundred dollars, that he had already paid.

I am having a proble with the fee to the collection agency. I will try to help William as much as I can.

You guy are great thank you so much. I will pass this on to him.

This is the American Collection Systems Inc.

[looksbothways]

I can't fathom a federally backed student loan that goes unpaid for 30 years without the government seizing wages and/or tax returns to pay it. This just sounds way fishy. I'd make sure to check through the department of education to see if they have record of a delinquent student loan, and check with the university to see what their records indicate.

Barring that, I'd probably wait through this tax season and see if they take my tax return as they would have the power to do if they were legitimately collecting on a federally backed student loan. Of course, I get a sizeable return that would cover the full debt and I'd only do that if all attempts to verify the validity of the debt through the government and the university left me empty handed. I would NOT hand over any money to the CA voluntarily without concrete proof I owed the debt, especially if I distinctly remember paying it already and it was 30 years old.

[Tsandy7]

lookbotheways, I was thinking the same thing.

[sgip2000]

He gets a letter in the mail June 30, 2008 from a company called American Collection; on the attached letter it states their client is Ohio Northern University.

Based on this, I wouldn't pay them a dime. The school is trying to collect, not the government.

[Debt Guy]

I can't fathom a federally backed student loan that goes unpaid for 30 years without the government seizing wages and/or tax returns to pay it.

You are using too much logic. Here is how these things happen:

New administrator (treasurer, fiscal officer, chief accountant) joins institution. Tours basement of administration building. Finds 100 boxes of old crap just like this that someone 25 years ago decided was too much trouble. Says to self: we could make money on this. Assigns accounts to collection agency.

My guess is this is a direct student loan like the small loans I had in college 35 years ago. Very different than modern student loans. Administration of these was all local and may have never been a surviving record at the federal level. The DSL program loans were always payable directly to the institution.

Like I said, the first step is to contact the institution and see if it passes the gut test. There will be some sort of explanation.

If friend thinks he paid many years ago, say so in a non-confrontational manner -- it could be an error either way. Just say, "I want to do the right thing but by durn I'm just positive I paid this back in 77. I don't have any records that far back. Can you tell me what your record shows and explain what happened?"

I promise you that the CA (however hated they might be) did not manufacture this out of thin air. (Bud Hibbs is a self-promoting blowhard -- I cannot tell that he has actually helped anyone -- but dispenses a lot of bad advice).

If it does not pass the gut test, refuse to pay. Or pay just to get it behind you.

And yes, seizure of a tax refund is entirely possible. As thousands of scofflaws learn every year.