Student Loan Default and Options (Please Help)

[Regatta03]

Hello all,

I have 2 student loans, totaling $19,606 that are apparently in default. When contacted, the collections agency gave me the following options:

1.) Full Repayment at a pay-off of $18,702
2.) $9,803 initial payment and $213 monthly
3.) $6,470 initial payment and $263 monthly
4.) $3,921 initial payment and $298 monthly

I am currently 24 years old and have approximately $29,000-30,000 in a savings account and make $80,000/year with expected bonus. What do you guys think is the best option? I am interested in repairing my credit as well since I'm sure this damaged my score.

Thank you very much for the help; it is greatly appreciated!!!

 

[FinanceDude]

Hello all,

I have 2 student loans, totaling $19,606 that are apparently in default. When contacted, the collections agency gave me the following options:

1.) Full Repayment at a pay-off of $18,702
2.) $9,803 initial payment and $213 monthly
3.) $6,470 initial payment and $263 monthly
4.) $3,921 initial payment and $298 monthly

I am currently 24 years old and have approximately $29,000-30,000 in a savings account and make $80,000/year with expected bonus. What do you guys think is the best option? I am interested in repairing my credit as well since I'm sure this damaged my score.

Thank you very much for the help; it is greatly appreciated!!!

Why default, when you have almost $30K in savings? Just pay it off or bring it up to date!

 

[Sarah in SC]

Less credit damage if you pay in full, I suspect. It will still take a while to drop off your report, but paying sooner is better for that. I would do the lump sum at this point, since you have the cash available.

 

[REWahoo]

I don't understand why you allowed it to go to a collections agency even though you have more than enough to pay it in full, but I've not walked in your moccasins. Pay it off immediately and move on.

 

[Regatta03]

Agreed

Thank you very much for the quick response! I completely agree...I had no idea that the debt even existed.

I received a scholarship to go to school and somehow the loans were taken-out for "living" expenses during the 4 years there. My mom did not do a good job of relaying the information concerning these to me at all until I got a call from a collections agency regarding the loan default this morning.

From the options, which do you think makes the most sense? Paying the loan(s) off now would take approximately 63-66% of my total savings. Taking my savings from $30k to $10k. Do you think it is more valuable to hold a larger sum in the bank as savings and make monthly payments or simply pay the outstanding balance now and wipe it completely off of my plate forever?

Also, regarding credit score. What is the best option in-terms of repairing credit? Again, thank you very much for your time and real advise!

 

[Coderguy]

Thank you very much for the quick response! I completely agree...I had no idea that the debt even existed.

I received a scholarship to go to school and somehow the loans were taken-out for "living" expenses during the 4 years there. My mom did not do a good job of relaying the information concerning these to me at all until I got a call from a collections agency regarding the loan default this morning.

From the options, which do you think makes the most sense? Paying the loan(s) off now would take approximately 63-66% of my total savings. Taking my savings from $30k to $10k. Do you think it is more valuable to hold a larger sum in the bank as savings and make monthly payments or simply pay the outstandind balance now and wipe it completely off my plate forever?

Also, regarding credit score. What is the best option in-terms of repairing credit? Again, thank you very much for your time and real advise!

Your school is not supposed to give you a diploma until you complete exit loan counseling. You sit down and they tell you about your loans; that you have to pay them back; and your options. This is strange. I would say pay it off as it would be best for your credit.

Edit, assuming they are federal? :https://www.dl.ed.gov/borrower/CounselingSessions.do

 

[Westernskies]

Hello all,

I have 2 student loans, totaling $19,606 that are apparently in default. When contacted, the collections agency gave me the following options:

1.) Full Repayment at a pay-off of $18,702
2.) $9,803 initial payment and $213 monthly
3.) $6,470 initial payment and $263 monthly
4.) $3,921 initial payment and $298 monthly

I am currently 24 years old and have approximately $29,000-30,000 in a savings account and make $80,000/year with expected bonus. What do you guys think is the best option? I am interested in repairing my credit as well since I'm sure this damaged my score.

Thank you very much for the help; it is greatly appreciated!!!

How can you have a loan "apparently" in default? It either is or it isn't, you know whether you are current or not. If you owe the money and have the resources, do the right thing and pay it off, before your "apparent default" turns into an "apparent judgement" and you start getting increasingly hostile calls from the "apparent collection agency" charging you "apparent interest" and "apparent fees", with an "apparently" negative further impact on your credit score... I doubt you are getting anywhere near the interest rate on your savings that you are [-]not[/-] paying in interest on the loans, so you can't play the offset interest rate game, anyway.

As a taxpayer, I don't care about your credit, but I do care about your default...We loaned you the money to get that "$80,000/year with expected bonus" and it's payback time... apparently.

 

[ronocnikral]

I received a scholarship to go to school and somehow the loans were taken-out for "living" expenses during the 4 years there. My mom did not do a good job of relaying the information concerning these to me at all until I got a call from a collections agency regarding the loan default this morning.

Did you or did you not sign for the loans? If you signed for it, I would pony up the cash and be done with it. If they're your mother's PLUS loans...that's a little more sticky.

 

[Sarah in SC]

Thanks for clarification. I think the sooner the entire loan drops into the paid column on your credit report, the faster you'll get your credit score higher. There is no such thing as "repair".

Pay the loan and save like crazy to get your cash stash back up to your comfort level.

And get your credit report every year from now on!

 

[brewer12345]

Your school is not supposed to give you a diploma until you complete exit loan counseling. You sit down and they tell you about your loans; that you have to pay them back; and your options. This is strange. I would say pay it off as it would be best for your credit.

Edit, assuming they are federal? :https://www.dl.ed.gov/borrower/CounselingSessions.do

I would suggest that you make sure these are in fact valid claims. Could be bullpucky and a shake-down. Ask for paperwork.

 

[Coderguy]

I would suggest that you make sure these are in fact valid claims. Could be bullpucky and a shake-down. Ask for paperwork.

As mentioned above. It's the taxpayers money I borrowed. I signed for the loans. Even if exit counseling isn't required; who am I to borrow from my fellow citizen and then act all inconvenienced afterwards? In my case; I did the exit counseling four years ago; it would be a little late to find out it is BS. Although the federal site itself says that it is required.

You may have to check with your specific school; here is an example (not my school) : http://finaid.ucsf.edu/continuing-students/exit-counseling-requirements-graduating-students

 

[brewer12345]

As mentioned above. It's the taxpayers money I borrowed. I signed for the loans. Even if exit counseling isn't required; who am I to borrow from my fellow citizen and then act all inconvenienced afterwards? In my case; I did the exit counseling four years ago; it would be a little late to find out it is BS. Although the federal site itself says that it is required.

You may have to check with your specific school; here is an example (not my school) : Exit Counseling Requirements For Graduating Students | UCSF Student Financial Aid

My comment was really directed at OP. There are plenty of instances of collectors shaking down supposed borrowers where there is no valid debt owed.

 

[Coderguy]

My comment was really directed at OP. There are plenty of instances of collectors shaking down supposed borrowers where there is no valid debt owed.

OHHH, oops

and YES; I was shook down for 3,000.00 after school.

 

[Regatta03]

Thank you all very much for the information; this helps a great deal.

@Westernskies: Yes, the loans are in-fact in default. I apologize for any confusion and respect your level of bluntness.

From the overall responses, it seems as if paying the lump sum amount of $19k is the best option when considering total payment amount, credit score (?), and "ease of mind" factor...

...However, from what I am reading online by making 9-10 payments and getting the loan back into "current" status, the individual default is wiped off of the credit report and the satisfactory monthly payments are illustrated showing a positive trend. I assumed that this would be better for the purpose of improving the credit score; but maybe this is a wrong assumption.

 

[KM]

Thank you very much for the quick response! I completely agree...I had no idea that the debt even existed.

I received a scholarship to go to school and somehow the loans were taken-out for "living" expenses during the 4 years there. My mom did not do a good job of relaying the information concerning these to me at all until I got a call from a collections agency regarding the loan default this morning.

From the options, which do you think makes the most sense? Paying the loan(s) off now would take approximately 63-66% of my total savings. Taking my savings from $30k to $10k. Do you think it is more valuable to hold a larger sum in the bank as savings and make monthly payments or simply pay the outstanding balance now and wipe it completely off of my plate forever?

Also, regarding credit score. What is the best option in-terms of repairing credit? Again, thank you very much for your time and real advise!

It is hard to tell from the statements above whether or not you remember taking these loans. It is also possible, based on the statements above, that you do remember - you just didn't understand the repayment terms. I recently helped DD's friend (recent college grad) understand her student loan repayment options. I was pretty surprised at how uninformative the exit loan counseling really is. Better yet, I am amazed at how little students understand about what they are borrowing in the first place.....and what it will cost to pay it all back. But I digress....

If you don't remember taking the loans, then I would agree with Brewer. First thing is to make sure these loans are legit. If you do determine they are legitimate loans that you signed for - pay them off. You have a good income and should be able rebuild your savings easily.

Also, if you agree to pay them in full, you may be able to have the lender make note somewhere that you were unaware of the loans and paid them in full as soon as you were aware. Not sure if this would work or not - but I would certainly ask.

In your case it sounds like the loans were a good investment, so pay them off and move on to saving for retirement.

 

[youbet]

If you don't remember taking the loans, then I would agree with Brewer. First thing is to make sure these loans are legit. If you do determine they are legitimate loans that you signed for - pay them off. You have a good income and should be able rebuild your savings easily.

+1 KM and my opinion exactly.

To OP: It seems like the only awkward part of your situation is the fact that you're surprised by the delinquent status of the loan(s) or even of their existence. The principal amount vs. your income is very resonable and repayment should be of no long term consequence to you.

This is an example of what student loans are supposed to be: enablers of a good education and modest vs. future income.

 

[Regatta03]

Great. Thank you guys. I won't feel so bad about paying this thing off in full...

I just can't imagine having $10k in the bank...but then again, I'd have zero debt as well...Thanks again, guys.

 

[HFWR]

I would verify that you actually owe the money. If so, I would contact the original creditor, and arrange to pay it in full, or at least make it current. I would do everything possible, short of not paying a legitimate debt, to NOT deal with or pay anything to a collection agency...

 

[Regatta03]

@ HFWR: I called the original creditor (Great Lakes Student Loans) and asked if I could arrange something with them. According to the representative that I spoke with, the account had been transferred to the collections agency and they could not view details; nor could they discuss repayment methods/strategies, etc.

 

[HFWR]

@ HFWR: I called the original creditor (Great Lakes Student Loans) and asked if I could arrange something with them. According to the representative that I spoke with, the account had been transferred to the collections agency and they could not view details; nor could they discuss repayment methods/strategies, etc.

Well, it was worth a try. It worked for me in the distant past. Having dealt with [-]shysters[/-] collection agencies after my divorce, I'd like to send them all a nice Molotov cocktail...

Pay it off, then go have a beer!

 

[Coderguy]

@ HFWR: I called the original creditor (Great Lakes Student Loans) and asked if I could arrange something with them. According to the representative that I spoke with, the account had been transferred to the collections agency and they could not view details; nor could they discuss repayment methods/strategies, etc.

This is funny; the great lakes loan is the one I had huge problems with (and still do today). Sallie Mae also refused to include their loans in my consolidation loan. Maybe you could request a copy of the original loan agreements? I would be careful when paying this.

Edit: relevent: http://www.consumeraffairs.com/finance/great_lakes_student_loans.html

 

[Regatta03]

Update: Paid the full $19,452.96 and opted out of the "settlement" amount of $18,702.00. Definitely not worth the ~$800 saved.

Can't really say how I feel...but damnit...it's completely off my plate and I have $0 in outstanding liabilities to anyone.

THANKS AGAIN FOR ALL THE VALUABLE COMMENTS AND ADVICE