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ERS Collection - STUDENT LOAN... Offer too good to be true?


obsoleet
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I posted this in the collections forum before I realized this was probably the proper place so apologies:

ERS contacted me and offered to put me on a loan rehabilitation program.

They said I would need to pay $800 upfront and then I would have monthly payments of $249.

After 6 months of perfect payments, I would have the defaulted student loan removed from my credit and it would show in good standing. They said I would be eligible for federal financial aid again after 6 (or 9) months (i can't recall).

They wanted my credit card information for my checking account. I set up a checking account at another bank that would be used for this purpose alone...

My question is... is it ok to give him the debit card information? Does he really need the $800 down payment? Will everything he promised come true? I asked for something in writing and they just gave me a generic letter.... he said I could talk to his supervisor if need be... Should I record the phone conversation?

I called the federal student loans department to see if this was legit and they said they couldn't deal with me since ERS was handed the case...

Does any of this make sense and should I trust ERS?

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Yes, the rehab program is real and is legit. However, there are a few things to note about the situation ..

The rehab program is 9 months to get out of default and off your credit, not 6. The 6 month mark allows you to get Title IV again if you want, but it is not until your 9th payment that you are eligible to come out of default, and even then it may take another month or two, so make sure you keep your payments up even after 9 months to ensure you do break and have to start over.

The rehab program does not require any down payments. Simply speaking, it only requires that the payments be "reasonable and affordable," which most guarantors define as equal to or more than what the payment would be on a 10 year payoff. Anything they are trying to get you to do as a down payment is just because the collection company (and the individual collector) get paid more based on how much they collect, thus they make it their "requirement" to pay a down payement. Rest assured, this is not required per the rehab program.

That said, it is still in your best interest to pay as much towards this program as possible while it is in default. The reason being that the collection fee will get recalculated at the end of the rehab program, so instead of being 20% or so of your balance that defaulted, it will be 18.5% of the new balance at the completion, potentially saving you thousands. This is one of the most inderrated things about the rehab program because most people don't know about it.

Recording the phone call is all well and good, but you have to inform anyone you are recording that you are recording it, otherwise if you tried to use it in court it would be inadmissable, or at least that is what I am told.

Good luck.

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  • 3 weeks later...

you may want to look into consolidation, as it may be cheaper in the long run. it is a much quicker process as well. i did that for my loans, and it was out of default in about two months. there were collection fees added to my loan, but it definitely costs less to consolidate, and i am eligible for a forgiveness program through the government. i enrolled into the services of a third party company, since i had garnishments as well. it may be easier just to do it that way, and from what they are asking for payments, i can tell you now it would be cheaper with the company i went through to do a consolidation.

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A consolidation can be a great tool to help get yourself back on your feet, but just know it isn't necessarily in everyone's best interest.

First of all, a consolidation does not have the same benefits to your credit report as does the rehab program. Basically, the rehab program erases the default completely, whereas the consolidation just shows as "paid in full" and will remain as that mark for 7 years, or however long the statute is in your state.

Secondly, while you may be able to get a lower payment for your loan, that doesn't mean you are better off. You interest rate will probably be jacked up. This means that you will be acruing more interest and paying less towards the loan. You can do the math and know that long term that is actually worse off than a regular rehab.

The forgiveness program is where after you have paid for 25 years on the loan with it still being in good standing, the gov't will forgive your remaining balance. It's a great selling point, but if you even get that far you would have paid the amount of the original loan maybe several times over due to your interest rate going up.

The only time I recommend a consolidation is when the borrower is having trouble making their regular payments. It definitely can make them more affordable and resolve/prevent a default. Just know that it sounds much better than it is long term.

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  • 7 months later...
  • 1 month later...

The offer was legit and I ended up getting it out of default status to show two years perfect payments and ended up paying off the ~$36,000 in loans

 

Congratulations!

 

It is liberating getting out of default status. I myself had to do a rehab payment plan so I could go back to school. 

 

Big grats on paying off your loans!

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