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Collection Agency after defaulting rehab program


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Hi fellow persons trying to rehab their credit.

I have a couple of student loans totaling about 33,000 dollars. They were Sallie Mae when I took them out ... I have defaulted on them. I started a rehab program in 2009 for Texas Guaranteed. After six or seven payments I stopped paying due to financial reasons. Now my loans are at a collection agency Van Ru Credit.

The person I spoke with seemed nice, he did tell me that since I have already defaulted and went through one rehabilitation program... I am not eligible for another rehabilitation.

I was told my only options are to pay the debt off in full or to make payments through Van Ru working for Texas Guaranteed till the student loan is paid off.

I can never get out of default status... and after 12 payments a payment line will begin on my credit report. I have set up payments for 250 dollars a month starting in a couple a weeks. Seems like I will paying this off for the rest of my life... hopefully I see some positives on my credit report, I would like to buy a home one day.

Tough times out there... what else can I do?

Kind regards,


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You have a few different options. First of all, if you truly only made seven payments in your rehab program in 2009, then you wouldn't have completed the rehab program. While it is true that a loan is only allowed to rehab once, in order for it to be considered a rehabilitated loan it must have completed the entire rehab program and must have been funded by the new lender/servicer. The only way it is eligible for funding is if the borrower has made NINE consecutive payments. What this means is that if you only completed SEVEN payments then it would never have completed the rehab program, and thus would still be eligible to be reset in rehab. You can check this by asking for a payment history, and see if the loan ever changed hands in the last few years or if Texas Guaranteed owned it the whole time.

Now, let's assume for a moment that you were mistaken and actually did complete the rehab, you still have options aside from paying on it while it is in default on your credit report. The easy solution would be to consolidate through the US Dept of Education. Basically, what will happen is your credit report will show this current loan as paid in full, and a new loan will be established, in good standing, which you will have the option to setup on an income based repayment plan, meaning they only take your income into account when calculating your payment, not the size of the loan. This will make sure your payments are affordable. Even if they aren't at first, because it is in good standing you will have the ability to put it into deferment.

The other thing you can do, depending on your financial situation, is pay on it monthly like you are while trying to gather a lump sum of money to offer as a settlement. The likelyhood of them accepting anything lower than 90% of the balance though is minimal. You would probably have to come up with a minimum of principle + interest and they would probably wiave the collection fee. This would save you the most money in the long term.

The collection agency probably has a stipulation that they get to keep your account as long as you are making payments, which is why they are ok with you just paying on it monthly for the rest of your life, but don't be fooled! When it comes to your credit, that is probably the worst possible option you have, not to mention overall monetary output including fees and interest acruel.

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Thanks for the responses...

StudLoanGuru ... thanks for the detailed information... I'm guessing at the 7 month time... but I did call the US Department of Education before I made contact with the collection agency.

The woman at the USDofE informed me that since my rehab went into default I wasn't eligible for another rehab and I would have to work through the collection agency. Could the person I spoke with at the Department of Education be wrong?

I will have to request my payment history... since the lender Texas Guaranteed has referred me to the collection agency through the automated calling system, who should I check with for accurate payment history?

The collection agency representative, although probably biased, mentioned I can not rehab more than once would they be able to give me the right information on payment history? I didn't appreciate he was saying they could pull my "license" for work for nonpayment if I didnt start getting this squared away soon. (I work for the Post Office)... It seemed like a bullying lie tactic.

Thanks for your time!


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It sounds like you completed the rehab the first time, which would mean that both the woman at the DOE and the collector are correct in that the loan cannot be rehabilitated again. I think your best strategy at this point is to consolidate the loan through the William D. Ford Consolidation. It is basically open to all government loans and is an alternative to rehab. That will basially resolve the active claim on your credit report right now by showing the current loan as "paid in full." It also sets you up on an income contingent repayment plan, where your payments are based on your household income, not the size of the loan, which will make the payment more affordable for you and prevent it from defaulting again.

The collection agency may or may not offer that, but if not you can apply for it on your own through the following website:


As for your license, the collector is taught to explain to you all of the consequences of default. They are not allowed to threaten you or lie to you, but they are allowed to educate you. I don't know if Texas Guaranteed is one of those that allow it, but I know some states/guarantors dictate that a if a loan defaults, the borrower may forfeit any and all licenses they have through the state department, so it is a real possibilty that it could occur. You shouldn't run into any problems with that unless your license is up for renewal in the near future and the loan is not consolidated by then.

Good luck with everything.

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