Serious Student Loan Trouble - Really Need Help

[CuldesacElephant]

I am embarrassed to post this on this forum because it seems like everyone here is successful, but I really need help.

My student loans (all federal) have been in default for a long while (since April 2016), and I am extremely scared about my current situation. I’d really appreciate some confirmation and any other help.

Yesterday I got a letter in the mail from a company called Alltran (it was dated Feb 5, 2019) about my student loans, specifically the Perkins loans I got from my university. I did some research and found out they are a collections company that my university gave my loans to. They said I have 30 days (Mar 7, 2019) to “dispute the validity of the debt”. I have not responded to them yet.

I’ve been up reading random articles for about 12 hours now, and I think I now understand how to get out of default.

From what I understand, there are two ways to get out of default (aside from paying everything in full): consolidation or rehabilitation.

Consolidation doesn’t cost money, but can take 2 to 3 months to process, and you aren’t eligible if you have wage garnishment. Your defaulted loans will stay on your credit report.

Rehabilitation is where you contact your loan servicers, tell them you want to rehabilitate the loan, and agree to a monthly payment that you must make on-time 9 months in a row, after which your loans are out of default. Your defaulted loans are removed from your credit report.

After using one of those two methods and your loans are out of default, you are then eligible for IBR (or other income-driven repayment programs) and can get a monthly payment as low as $0.

Is all of the above correct?

I also have five short follow-up questions:

If I know I’m not going to be able to get money to pay the loans for 9 months in order to rehabilitate, should I consolidate ASAP? I’m assuming yes, before Alltran tries to garnish my wages.

If I do go ahead and consolidate ASAP, will I still owe the collections fees that the collections company charged me with?

How long before student loan collections companies try to garnish your wages (specifically Alltran if you know about them)? If it makes any difference, remember I’ve been in default since April 2016, and the letter is dated Feb 5, 2019.

If I am able to get money to pay the loans for 9 months and can rehabilitate, after I’m out of default can I then consolidate and not be in collections anymore? If yes, after I consolidate will I still owe the collections fees that the collections company charged me?

I will try to respond to any questions that come up, but I have been up for a very long time stressing out and reading about all this, so it is likely that I will fall asleep very soon and won’t see any responses until tomorrow.

Below is my background/situation if anyone is interested. You can ignore it if you want.

I don’t have a job, my family is poor, and I have $50,000 in defaulted federal student loans (none of them are private). I made some really stupid decisions in college and hung out with some people who had a negative influence on me. I dropped out of college in 2014 and couldn’t find a job, and I soon spiraled into deep depression. Part of the depression came from my student loans. No one in my family went to college, and no one in my family knew anything about finances, loans, or anything like that. Since I had zero clue about anything and I had no one to guide me, I ended up defaulting. I didn’t know what the word default meant until I was in it. Of course, if I knew what I do now, I would have applied for IBR after dropping out. I ended up with a minimum wage job a while back that treat me like crap that made my depression worse, and after about two years I quit and moved in with my grandma. That was in 2016, so I’ve been living with her for almost three years now. My depression kept getting worse and worse, and I kept getting rejected from jobs. Fast forward to today, and I’ve decided to become a web developer to lift myself out of poverty. I’ve been learning programming for a couple months now, I’m really enjoying it, I’m actually sticking with it, and I haven’t been depressed since I now have a goal to strive towards. But now I have this collections company looming over me, I’m extremely stressed out, and I’m starting to get extremely depressed again.

[katscratch]

I don't know as much about your loan options, so hopefully others will chime in.

But I will say: Be kind to yourself. You are doing the most important thing now, which is getting an idea of your financial picture. You have already taken steps to make things right -- this is HUGE!

I've been in a similar situation where I was extremely broke and didn't know what my debt level even was. The scariest part is just starting. It sucked to have anxiety about money for such a long time -- making a plan to move forward, even $5 at a time, was the first step to get me where I am now (paying off debt still, but able to pay my bills and even save a little bit).


I would suggest calling your loan servicers as soon as possible and explaining that you just found out what defaulting on your loans really means, and that you want to make things right, but don't know where to start. They might know the best way to help you.


It's also really great that you have found something that you're interested in and that you're actively pursuing!

I know it can be impossible to stop the feelings that come with depression, but logically please remind yourself you are bettering yourself and your life, and that breaking this current problem down into manageable steps CAN be done.

Step 1 - call loan servicers

[MrThatsDifferent]

Look after yourself and see if you can get some counseling. You’re on a good path, keep that up. I agree with the above, contact them, explain your situation and depression and see if you can work on a plan together. What you should’ve done is have your loans deferred. I’m not sure if you can now, but ask. Once you get yourself sorted with work, you can start paying them back. It might mean doing a side hustle or getting a second job. You can get out of this. It might take a little time. Keep your head up as much as you can. Good luck.

[COEE]

First - Deep breaths.

I'll second that you should be kind to yourself.  This is a learning experience.

I also can't give too much advice about your individual situation with the collection agencies.

The facts:
Unfortunately, student loans are not bankruptable.  You're stuck with this debt.  You must pay it off to get your monkeys off your back.  Can you live with g-ma and do some minimum wage level jobs?  Can g-ma pay for your room and board, food, and commuting in order to help you get out of debt?  Even minimum wage jobs will pay off a $50k job in a little over two years if you have no expenses and are working 60 hours a week.  60 hours a week doesn't leave much time for depression either.  Even if they start garnishing your wages - so what - you were going to pay them anyway.

Our story - not so different:
It took us about 3 years to pay off our student loans.  We had $40k in loans between my wife and I.  We made decent salaries, but we had too much debt and the debt took about 70% of our take home.  When we started there was little to eat with.  So we were in a similar situation, and many, many people here have been through what you're going through, but everyone's story is different.

Your plan:
You've got to hustle to fix this.  This is hair-on-fire emergency.  Take any job you can get.  Your bosses will shit on you.
 That's part of minimum wage jobs!  Soon enough you'll get a job or two that you moderately enjoy... those jobs will lead to a better job, and eventually you'll get excited that you're making progress... then you'll start struggling once you get about halfway through - it's totally psychological and normal.  About the 70% mark you'll find that you start to see the light at the end of the tunnel.  Eventually you'll look back and see the hole you dug yourself out of and you will thank yourself for your hard work!

Keep your chin up!  Have a cola.  Smile.

Thoughts for you from CO.

[AMandM]

I'm sorry not to have any knowledge of student debt, but I just wanted to add to the encouragement you've already received.  You have done the most difficult part: faced up to the problem. Going from ignoring debt to not ignoring it is huge progress, congratulations!  You also evidently have a plan for gathering the necessary information and taking steps to avert further financial disaster, congratulations again!  The rest is, in a way, relatively easy: figure out the plan, then do it. It will be tedious and burdensome no doubt, but once you've got the plan it will be simple. Hopefully that knowledge will help keep your depression at bay, too.

The only suggestion I might make is to get some kind of a job, even a crummy minimum-wage one, so that you have some income with which to rehabilitate your loans. If it's possible to earn enough for the rehabilitation payments, I would suggest part-time work, so that (1) it's not enough to drive you back into depression and (2) you still have time to work on learning programming.

You can do this!

[cchrissyy]

I don't know anything about SLs so just want to say something supportive. These people are right, you can get through this!

Try not to be intimidated by the collections tactics. Don't listen to anything they tell you, they do not have your best interest at heart and are not objective sources of information or advice. Also try not to be scared of wage garnishment. Even if they take that path, it takes time, and besides, you aren't working right now so a garnishment order wouldn't have any impact on you yet.

[ebella]

2 questions:
1) Why can you not pay the 9 month amount?  do you know what amount it is already or is it negotiable?
2) have you done anything (such as talking to any loan provider) acknowledging the debt?

Here's the thing; you can consolidate but you'll still have to pay it eventually and interest will accrue.  BUT you need time to consolidate.  You can buy some time by disputing the debt (in writing to them and, later, by filing a lawsuit).  But if you don't have a legit dispute it's just gonna get kicked back with interest and possible penalties for late payment. 
First thing I'd do is ask for a full accounting of debts i.e. the original debts, amounts, lenders, and the contract (showing your signature) where you acknowledge thew terms, then I'd ask for all assignments ans servicers and history of any missed payments, etc.  This is gonna take them awhile to provide.  Be super nice about it and like "hey, I'm going to pay it but I know there have been sketchy things and I need to be sure I actually owe this." But ask for literally EVERY SINGLE time anything happened with the loan.
Second, thing I'd do it take a look at it.  Did you ever have Navient or FedLoan as servicers?  If so, they have been sued for shitty practices and you might be able to buy some time there. Are you 100% sure you agreed to all the terms and in fact didn't pay what you owed? IT seems obvious but I've been paying loans for years and have had servicers fuck my stuff up.
Third, you need to get a job that will allow you to pay this back.  Doesn't matter what it is.  But you're going to have to pay it eventually so may as well find a way to do that now.
 

[Cool Friend]

I was in a very similar situation as you a couple years ago, let me try to remember:

For wage garnishment, I'm not sure if there's a routine schedule they follow.  They garnished my tax refunds for about 3 years in a row, and there was no warning or advance notice for that, they just sent me a letter saying they were taking it. Have they done that to you yet?  If you don't have a job, I would think technically you are not under wage garnishment, so you should be able to consolidate.  When I was in default like you, my loans were already consolidated, so my only option was rehabilitation; to my great fortune, I had a job at the time so this was feasible.

The thing about rehabilitation is that if you can show you have very low income and no assets, they can set you up with a reasonable payment plan that you can actually pay. The other bonus is that if you rehabilitate they won't garnish your wages, which will make keeping the job you need to get to get back on track much easier.  Then you can get your loans in an IBR as you mentioned.

I'm not sure how the collection agency fees work--I think if you work something out rehabilitation/consolidation-wise you don't have to pay the fees, but I'm not totally certain about that.

So you have some phone calls to make.  Like I said, I was in a similar situation--out of work for a couple years, couldn't pay the debt, became cripplingly depressed which exacerbated the problem.  I was a terrified, anxious mess, but when I finally confronted it and came up with a plan, I felt so much better.  And you're doing that now, so I want to say congratulations to you for choosing to face your understandable fears.  I did this only 5 years ago or so, and not only am I in good standing with my loans, I'm on track to have totally paid them off this year and it feels amazing.  Think of me as you in the future--you can do this!!

[frugalfoothills]

OK so, a lot of questionable information flying around on this thread. First of all, congratulations on taking steps in the right direction to improve your situation. You are doing awesome.

I've mentioned on this board before, but I actually work in the collections industry and can give you some guidance about how wage garnishments actually work. Student loans are a bit of a different beast than other types of debt but the same general information applies.

You need the read the letter you received carefully. You do not go immediately from default to having your wages garnished… in order to garnish wages or bank accounts, put liens on properties, etc. there must be an active judgment against you. In order for there to be a judgment against you, you must be sued first. In order to be sued, you must go through active collections and either not respond at all OR set up a payment plan and then break it. If the letter you received is from a collection agency and not a law firm and does not reference a lawsuit or judgment, then there is still time to avoid this. Ignoring the situation means they will continue down the timeline above and you could ultimately end up being garnished (COULD being the keyword.)

You have options here, but you need to be proactive. Call the agency and ask them the status of your account if you cannot figure it out from the letter they sent (have I been sued? Do you have a judgment against me?) As others have mentioned, you can ask for written validation of the debt (that is your right) and there will be no collection activity until it is provided to you. That will buy you some time (30 days.) You could file a written dispute once validation is complete but it sounds like that will be a fruitless endeavor -- you know this is your debt and you know that you owe it.

One option you do have is to attempt to file a claim of hardship with the agency based on the fact that you have depression, are unemployed, and have no assets. They may ask for documentation from you to substantiate the claim, and if they do substantiate, they can allow temporary or permanent relief. It sounds more likely it would be temporary in your situation (it doesn't sound as if you are unemployable, just that you currently do not have employment due to a myriad of issues including mental health), but it could provide temporary relief while you seek gainful employment.

The most important thing is to CALL THEM. Now. Today. Talk to them. Figure out the status of your account, ask for validation, ask for your options. Ask about interest accruing. Explain your hardship situation. Ask whether you can make small payments of [whatever is an achievable amount for you] until you are out of your financial hardship.

As others have said, this is a mess, but you're so much better of today than you were six months ago. You are aware of your situation and you can still take control of it. If you continue to put it off and you end up being garnished, the situation controls YOU, and you have waaaaaaay fewer options at that point.

[Cool Friend]

thanks for stepping in, foothills.  What's the story with the collection fees; will OP still be liable for them if he gets his loans back on track?

[Car Jack]

People, read the OP's post.  He doesn't have a job, so there are no wages to garnish.  I'm going to assume that he owns pretty much nothing.  So there's nothing to take.  If this were not a student loan, he'd be considered judgement proof.  What are they going to take from him?  The air in his room?

To the OP: Since you can request that they validate the loan, go ahead and do that.  It isn't going to hurt anything and will delay them a little.  Once that's done, it's fine to tell them you have no money and no job.  Don't give them any other information.  Don't admit it's your loan.  Don't give them an address or phone number.  Give them no information.

If you have no job, you're not getting a tax refund, right?  No job means no wages, means there's nothing to garnish. 

If a court date is set up....GO TO IT!  Tell the judge your story.  You have no money.  You have no job.  You don't ever expect to be able to pay this back.

[frugalfoothills]

People, read the OP's post.  He doesn't have a job, so there are no wages to garnish.  I'm going to assume that he owns pretty much nothing.  So there's nothing to take.  If this were not a student loan, he'd be considered judgement proof.  What are they going to take from him?  The air in his room?

To the OP: Since you can request that they validate the loan, go ahead and do that.  It isn't going to hurt anything and will delay them a little.  Once that's done, it's fine to tell them you have no money and no job.  Don't give them any other information.  Don't admit it's your loan.  Don't give them an address or phone number.  Give them no information.

If you have no job, you're not getting a tax refund, right?  No job means no wages, means there's nothing to garnish. 

If a court date is set up....GO TO IT!  Tell the judge your story.  You have no money.  You have no job.  You don't ever expect to be able to pay this back.

Correct, he has no wages AT THE MOMENT. My point being that if he does push this off, they do obtain judgment, and then he does get a job with wages, there will be something to garnish at that point and by then it's too late. Primary concern should be doing everything possible to avoid a judgment at the moment.

It's tough to speculate because every business has different practices. It doesn't make much sense to sue someone (costs money) and obtain a judgment (costs money) on top of paying the collection fees if this person has no way to pay but hey, I don't work for this company so who knows how those decisions are made internally. Feels unlikely but I can't say it wouldn't happen (I would argue it would be wasted cost on their behalf, though.)

Re: collection fees -- see above. Everyone does it differently. Some places consider fees incurred during the collection process as recoverable toward the overall balance. Others will wait until judgment to roll the fees up (so you can potentially avoid paying fees by avoiding the judgment.)

That's why OP needs to call. Now. Figure out what's going on with this particular loan in this particular situation. I can speculate but that's all it would be... speculation.