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Posts Tagged ‘Department of Education’

When you say “Direct Loan,” I believe you are referring to the U.S. Department of Education’s Direct Loan Program (www.dl.ed.gov), where you can transfer and consolidate your federal education loans into a single, new loan which offers lower monthly payments. Whether or not it makes economic sense to transfer the loans depends on a host of factors, including: how manageable (or unmanageable) your monthly payments are; how many payments are left on your existing loan; the amount of time and interest you are willing to pay over time; and the interest rates on your current loans.

If you have variable rates on those Stafford Loans, it may be helpful to consolidate them in order to get a fixed rate. On a Direct Consolidation Loan, the rate is based on the weighted average of all your combined loans, rounded up to the next highest 1/8th of a percent. Your loan rate can never go above 8.25%. There are two quick and easy ways to see the financial ramifications of transferring/consolidating your loans. You can use this online calculator provided by the Department of Education. Or you can simply call the Department of Ed at 800-557-7392 and a customer service representative will be able to tell you your new payments — as well as how much extra you will pay in interest charges by consolidating.

Since you are now working as a police officer, your best option may be to investigate whether you will qualify for student loan forgiveness. This is granted to certain individuals who work in public service fields. To be specific, look into the debt-forgiveness provisions of the College Cost Reduction and Access Act, which became effective July 1, 2008. Its purpose is to help eliminate the student loan burden of public services employees, ranging from school teachers and social workers to fire fighters and police officers like yourself.

I don’t know many key facts about your situation, like whether or not you had federal loans or private loans, the exact total of all your college loans, and how long you may have been paying on them in the past. Nor do I have any idea about your income and expenses, or how long ago it was that you filed for bankruptcy protection. So it’s hard for me to give you more individualized guidance. In any event, you can get additional information and advice about your
loans online from the federal government at: www.studentaid.ed.gov. Also, even though Sallie Mae appears to have told you that you can’t consolidate, I wouldn’t rely solely on their word. To find out if you are eligible for a federal direct consolidation loan (which would also help you qualify for loan forgiveness) call the Department of Education at 800-557-7392 or visit their loan consolidation page at: www.loanconsolidation.ed.gov.

You did not state whether you are struggling with federal student loans or private loans. Whatever the case, I believe the article I’ve written below answers your question about how to handle student loans in collection. Essentially, you have four options:
•           Consolidate the loan(s)
•           Enter a loan rehabilitation program;
•           Pay the loan(s) off completely
•           Get the loan(s) totally discharged or canceled
Read on for more details about each of these alternatives, and to discover how to fix other common problems associated with having delinquent/defaulted student loans.

How to Fix Defaulted Student Loans and Wage Garnishments

In this tough economy, an increasing number of college graduates (and college drop-outs) are falling behind on their student loans. According to the Department of Education, federal student loan defaults were up to 6.9% in 2009, well above their 2008 of 5.2%. For those carrying private loans, defaults hit 3.37% in 2008 versus 1.47% in 2006, according to Sallie Mae, one of America’s largest providers of private loans.

As you probably already know, defaulting on a student loan is a very serious matter. A federal college loan falls into default status if you are supposed to make monthly payments, but have not done so for 270 days. For those whose student loan payments are less frequent, a default occurs once you haven’t made payments for 330 days. In either case, the government has the right to take your federal tax refund check or garnish up to 15% of your disposable pay in order to collect on a defaulted federal student loan. Defaulted student loans also negatively impact your credit.
Appealing a Wage Garnishment

The good news is that you can appeal a wage garnishment and request a hearing on the matter in order to demonstrate why it is that you can’t afford that the payments and wage garnishment your lender or guaranty agency is seeking. The U.S. Department of Education Debt Collection Services Office (DCS) holds the hearing after you fill out a “Request for Hearing” form regarding your wage garnishment, and send it to the Department of Education. Find the document online at: www.ed.gov/offices/OSFAP/DCS/forms/Request.For.Hearing.pdf
Your hearing can be done in-person, over the telephone, or in writing; the choice is up to you.

IMPORTANT NOTE: When you submit your Request for Hearing, make sure you also send another EXTREMELY IMPORTANT document. It is the “Financial Disclosure Statement,” a 3-page document in which you must document your income and itemize all your expenses. Here is a link to the document online: www.ed.gov/offices/OSFAP/DCS/forms/fs.pdf. This “Financial Disclosure Statement” form will be critical in the hearing/appeal process, and will be closely evaluated, so take the time to carefully list all your bills, and provide copies of those bills as requested.  On page 3 of the Financial Disclosure Statement, you will notice a line that says:
“Based on this Statement, I think I can afford to pay $               per month.” This is where you have an opportunity to essentially offer a counter-proposal to the Department of Education about your student loans. Regardless of what you’ve been asked to pay in the past, here is where you should realistically evaluate your budget and come up with a number that you can undoubtedly pay (without a huge financial strain) month after month.
The Department of Education will make a decision about your case within 60 days after your hearing. But in the meantime, any wage garnishment that has already started will continue to be in force.
Four Options to Cure a Defaulted Student Loan
Now, in order to get your student loan(s) out of default, you have four options:
•           Consolidate the loan(s)
•           Enter a loan rehabilitation program;
•           Pay the loan(s) off completely
•           Get the loan(s) totally discharged or cancelled
The last two are probably not realistic options. I know you don’t have the money to pay off the loan(s). That’s why you’re in this predicament; and loan cancellations are rare (though they can be obtained).  You’ll likely have to “rehabilitate” your loan(s) or consolidate.
Should You “Rehabilitate” Your Loans or Consolidate?

Before you can consolidate, you have to bring your loan(s) out of default status. You do this by making just three monthly payments — on time, and in any amount that you and your lender agree upon. To find out if you qualify for loan consolidation, contact the Federal Direct Consolidation Loan Info Center at 800-557-7392 or go online to loanconsolidation.ed.gov.

If you call, the staff there should be able to tell you what your monthly payment will need to be for those three months while your loan is in repayment. The one drawback to consolidation is that your credit remains tarnished. Even though your loan will be paid off and listed as “paid in full” on your credit report, you’ll get a new loan through consolidation and that previous default still shows on your credit report for seven years.

An alternative, to fix your credit, and have all past negative information about your student loans completely deleted from your credit file is to go through loan rehabilitation:

In a nutshell with rehabilitation you make 9 or 12 on-time payments on your student loans in an amount you can afford. You make nine monthly payments on Direct Loans and Federal Family Education Loans, or 12 monthly payments on Perkins Loans. This, in my opinion, is the preferred route as it will help you restore your credit in a big way, so your past default won’t haunt you for years to come.
For more details about various alternatives to cure your student loan delinquency, check out the Department of Education’s guidebook called “Options for Financially-Challenged Borrowers in Default.” Here is a link to the guide online: www.ed.gov/offices/OSFAP/DCS/forms/2004.Borrower.Options.pdf

Get Help From an Ombudsman

Additionally, you should know that if you ever have a dispute with your lender or loan servicer about anything related to your federal student loans, there is a government agency that may be of assistance in resolving that dispute. It’s called the Federal Student Aid Office of the Ombudsman (www.ombudsman.ed.gov). Always try to work things out first with your lender by using this online “Self Resolution Checklist” from the Ombudsman’s office: ombudsman.ed.gov/resources/toolschecklists/selfresolution-checklist.html. But let’s say you think your loan was mistakenly placed in default by your lender – maybe you were in school at least half-time, you had a loan deferment or forbearance, or you actually made payments on your loan – and you can’t get a satisfactory resolution of the issue, then it’s time to reach out to the Ombudsman’s office.

Here is a link to the section of the Ombudsman’s website that gives you more information about handling defaulted student loans: ombudsman.ed.gov/loandefault.html. Also, this link gives you more info about wage garnishments: ombudsman.ed.gov/garnishment.html.

No matter what economic challenges you’re facing, you don’t have to live with wage garnishments and blemishes on your credit report because of defaulted student loans. Reach out for help today, and start the process of turning that college debt problem around.

As you probably know, student loans are generally not dischargeable in bankruptcy court. So despite your recent bankruptcy filing, any loans you had with Sallie Mae remain outstanding. To bring an overdue student loan current, simply contact your lender or loan servicer and make arrangements to pay the amount due – either in a lump sum or over time. If your student loan is seriously delinquent and is in default, you can do one of four things:

•           Consolidate the loan(s)

•           Enter a loan rehabilitation program;

•           Pay the loan(s) off completely

•           Get the loan(s) totally discharged or cancelled

More details to your question about resolving your past due/defaulted student loan(s) can be found in the article below that I recently wrote.

How to Fix Defaulted Student Loans and Wage Garnishments

In this tough economy, an increasing number of college graduates (and college drop-outs) are falling behind on their student loans. According to the Department of Education, federal student loan defaults were up to 6.9% in 2009, well above their 2008 level of 5.2%. For those carrying private loans, defaults hit 3.37% in 2008 versus 1.47% in 2006, according to Sallie Mae, one of America’s largest providers of private loans.

How Student Loans Become Delinquent

As you probably already know, defaulting on a student loan is a very serious matter. A federal college loan falls into default status if you are supposed to make monthly payments, but have not done so for 270 days. For those whose student loan payments are less frequent, a default occurs once you haven’t made payments for 330 days. In either case, the government has the right to take your federal tax refund check or garnish up to 15% of your disposable pay in order to collect on a defaulted federal student loan. Defaulted student loans also negatively impact your credit.

Appealing a Wage Garnishment

The good news is that you can appeal a wage garnishment and request a hearing on the matter in order to demonstrate why it is that you can’t afford that the payments and wage garnishment your lender or guaranty agency is seeking. The U.S. Department of Education Debt Collection Services Office (DCS) holds the hearing after you fill out a “Request for Hearing” form regarding your wage garnishment, and send it to the Department of Education. Find the document online at: http://www.ed.gov/offices/OSFAP/DCS/forms/Request.For.Hearing.pdf

Your hearing can be done in-person, over the telephone, or in writing; the choice is up to you.

IMPORTANT NOTE: When you submit your Request for Hearing, make sure you also send another EXTREMELY IMPORTANT document. It is the “Financial Disclosure Statement,” a 3-page document in which you must document your income and itemize all your expenses. Here is a link to the document online: http://www.ed.gov/offices/OSFAP/DCS/forms/fs.pdf.

This “Financial Disclosure Statement” form will be critical in the hearing/appeal process, and will be closely evaluated, so take the time to carefully list all your bills, and provide copies of those bills as requested.

On page 3 of the Financial Disclosure Statement, you will notice a line that says:

“Based on this Statement, I think I can afford to pay $               per month.” This is where you have an opportunity to essentially offer a counter-proposal to the Department of Education about your student loans. Regardless of what you’ve been asked to pay in the past, here is where you should realistically evaluate your budget and come up with a number that you can undoubtedly pay (without a huge financial strain) month after month.

The Department of Education will make a decision about your case within 60 days after your hearing. But in the meantime, any wage garnishment that has already started will continue to be in force.

Four Options to Cure a Defaulted Student Loan

Now, in order to get your student loan(s) out of default, you have four options:

•           Consolidate the loan(s)

•           Enter a loan rehabilitation program;

•           Pay the loan(s) off completely

•           Get the loan(s) totally discharged or cancelled

The last two are probably not realistic options. I know you don’t have the money to pay off the loan(s). That’s why you’re in this predicament; and loan cancellations are rare (though they can be obtained). You’ll likely have to “rehabilitate” your loan(s) or consolidate.

Should You “Rehabilitate” Your Loans or Consolidate?

Before you can consolidate, you have to bring your loan(s) out of default status. You do this by making just three monthly payments — on time, and in any amount that you and your lender agree upon. To find out if you qualify for loan consolidation, contact the Federal Direct Consolidation Loan Info Center at 800-557-7392 or go online to http://loanconsolidation.ed.gov.

If you call, the staff there should be able to tell you what your monthly payment will need to be for those three months while your loan is in repayment. The one drawback to consolidation is that your credit remains tarnished. Even though your loan will be paid off and listed as “paid in full” on your credit report, you’ll get a new loan through consolidation and that previous default still shows on your credit report for seven years.

The Benefits of Student Loan Rehabilitation

An alternative, to fix your credit, and have all past negative information about your student loans completely deleted from your credit file is to go through loan rehabilitation:

In a nutshell with rehabilitation you make 9 or 12 on-time payments on your student loans in an amount you can afford. You make nine monthly payments on Direct Loans and Federal Family Education Loans, or 12 monthly payments on Perkins Loans. This, in my opinion, is the preferred route as it will help you restore your credit in a big way, so your past default won’t haunt you for years to come.

A Guidebook for Cash-Strapped Borrowers from the Department of Education

For more details about various alternatives to cure your student loan delinquency, check out the Department of Education’s guidebook called “Options for Financially-Challenged Borrowers in Default.” Here is a link to the guide online: http://www.ed.gov/offices/OSFAP/DCS/forms/2004.Borrower.Options.pdf

Get Help From an Ombudsman

Additionally, you should know that if you ever have a dispute with your lender or loan servicer about anything related to your federal student loans, there is a government agency that may be of assistance in resolving that dispute. It’s called the Federal Student Aid Office of the Ombudsman (http://www.ombudsman.ed.gov). Always try to work things out first with your lender by using this online “Self Resolution Checklist” from the Ombudsman’s office: http://ombudsman.ed.gov/resources/toolschecklists/selfresolution-checklist.html. But let’s say you think your loan was mistakenly placed in default by your lender – maybe you were in school at least half-time, you had a loan deferment or forbearance, or you actually made payments on your loan – and you can’t get a satisfactory resolution of the issue, then it’s time to reach out to the Ombudsman’s office.

Here is a link to the section of the Ombudsman’s website that gives you more information about handling defaulted student loans: http://ombudsman.ed.gov/loandefault.html. Also, this link gives you more info about wage garnishments: http://ombudsman.ed.gov/garnishment.html.

Zero Debt for College Grads: From Student Loans to Financial Freedom

No matter what economic challenges you’re facing, you don’t have to live with wage garnishments and blemishes on your credit report because of defaulted student loans. Reach out for help today, and start the process of turning that college debt problem around. Lastly, for more information on paying off your student loans, check out my book, Zero Debt for College Grads: From Student Loans to Financial Freedom.  Click the following link to get the book now at Amazon.com http://www.amazon.com/exec/obidos/ASIN/1427754640/writersandpoetsc/102-5147702-8114506

Getting rid of your debt won’t be a matter of just writing letters to your creditors. In fact, since most of your debt is educational loans, you will be hard pressed to simply “negotiate” away this debt – as can be done with credit card bills. As the overwhelming majority of your debt is student loans, focus on that first and foremost. Here are seven smart ways to reduce your educational debt. It’s based on an article I wrote on this topic.

Seven Smart Ways To Pay Off Student Loans Fast

1. Pick the shortest loan repayment program you can afford

If you have federal student loans, there are four different loan repayment plans you can select:

• the standard loan repayment plan, where you pay a minimum of $50 a month and your payments last for as long as 10 years;
• the extended repayment option, which also requires at least $50 monthly payments, but which lets you pay off your educational loans over 12 to 30 years;
• the graduated repayment program, which lasts from 12 to 30 years and allows you to pay as little as $25 a month; and
• the income-contingent repayment plan, which permits you to make payments as low as $5 a month and which lasts for 25 years.

Tip: Don’t make the mistake of just picking the option that lets you pay the smallest monthly payment. That may help your cash flow in the short term, but in the long run you’ll pay thousands more in finance charges. The best strategy: pay as much as you can possibly afford on your student loans. If you can’t swing the standard repayment plan (with a 10-year payoff), and you have to choose a longer repayment plan, then at least make extra payments on top of your normal monthly payment.

Next Step: Even if you can only afford to throw an additional $25 or $50 a month on top of your regular payment, every little bit will help. Sending in “extra” payments is a short-term financial challenge, but if you go ahead and bite the bullet now, making sacrifices in the near-run, you’ll be much better off in the long haul.

2)      Ask your current or future employer to help you eliminate your student loans

A little-known way to get rid of college debts – including both private and federal loans – is to have your employer pay off the debt. Many organizations will do so if you sign an employment incentive contract. This means that as a “bonus” or “perk” to you, your job pays your student loans. In turn, you agree to be a loyal employee and remain with the company for a given time period, say at least two to three years. Think about it this way: getting an employer to pay off your student loans is just another form of a benefit. Companies offer workers extra cash all the time – like hiring/signing bonuses, performance bonuses, year-end bonuses or holiday gift money, etc. Therefore, money provided to knock out student loans is simply another form of cash compensation. Why are companies willing to consider offering student loan assistance? It’s simple: They want to hire and retain top talent.

Tip: The next time you’re up for a raise or performance appraisal, raise this subject with your boss. You can also bring up the matter to a prospective employer when you’re job-hunting; just wait until after you receive a firm job offer, and have started the salary-negotiation phase. Follow this advice, and you may not have to pay your student loans at all – your employer will!

3)     Get the federal government to pay off up to $60,000 of your college debt

The government’s Federal Student Loan Repayment Program can be a huge windfall to anyone with federal student loans (not private loans). Administered by the Office of Personnel Management, this program allows any federal agency that you work for to pay off up to $10,000 annually of your federal student loans, up to a maximum of $60,000. For more info, call the OPM at 202-606-1800 or visit http://www.opm.gov.

Tip: Here is a link to the specific page on the OPM website that will give you all the information you need to know about the Student Loan Repayment Program:
http://www.opm.gov/oca/pay/StudentLoan/. Be sure to check out the Fact Sheet and the Questions and Answers section on the left side of the website page.

4)      Get a deferment, forbearance or loan cancellation during periods of economic hardship

Most people think only students who are enrolled in school can get deferments. Nothing could be further than the truth. Practically anyone with an economic hardship can qualify for a loan deferment or forbearance – and some people with severe, chronic financial problems may be eligible to get their loans canceled altogether. Sallie Mae, the nation’s biggest student lender, offers deferments for nearly 20 different scenarios. You can have your loans payment postponements for the unemployed, for new mothers re-entering the workforce, for volunteers at non-profit agencies, for military enlistees, etc. Even having excessive credit card debt or unusually high personal expenses can get your monthly student loan payment drastically lowered. If you’ve had a string of bad luck, say you went through a divorce, got laid off, then had a car accident — all of which impacted your finances, you can qualify. Also, having a protracted hardship, such as a lengthy medical illness, the department of education may say it’s not worth it to make you pay off your loans – and they can cancel out your loan indebtedness.

Tip: To claim an economic hardship and ask for greatly reduced student loan repayments, fill out a simple 2-page form called a Statement of Financial Status. Find it online at the Department of Education:

http://www.ed.gov/offices/OSFAP/DCS/forms/fs.pic.pdf.

If you have private loans, you can also ask your lender or loan service company about deferment and forbearance options.

5)      Use volunteer activities or certain work to qualify for loan forgiveness or cancellation

A host of working professionals can have their loans forgiven or outright cancelled. These include police officers, lawyers, teachers, nurses, doctors and many in the healthcare field. People who volunteer at AmeriCorps (http://www.americorps.org), VISTA or the Peace Corps, or who help impoverished people and those in under-served communities can also have their student loans written off. These loan cancellation programs are available for the asking.

Tip: More than two dozen loan cancellation and loan forgiveness programs are detailed in my book, Zero Debt for College Grads. Get the book now at Amazon.com: http://www.loanconsolidation.ed.gov. The major advantage of consolidating student loans is that your monthly payment will be reduced, freeing up some of your cash flow each month. The biggest drawback is that, because consolidated loans are stretched out over a longer repayment period – up to 30 years – you’ll wind up paying two to three times as much as you would’ve paid had you not consolidated your loans.