Student Loan in Default - help!

What is the name of your state? North Carolina.

I was just contacted by DCS Incorporated who has informed me that my student loan is in default and they want to help me "rehabilitate" my loan. Their offer is for me to make 12 consecutive payments, but only if it is set up through a check draft called SmartCheck. If I don't do this, they are threatening wage garnishment or taking me to court on October 20th.

I can't pay what they are offering for settlement in full, nor can I afford their down payment and monthly payment plans.

Help! Does this sound legit? What are my options?

[Skylyn]

You don't have many options. Here's the same reply I gave to someone else, last week, with the same questions:

With Federal student loans, they don't need a court or judgement to garnish your wages. The hearing is an AWG (Administrative Wage Garnishment) hearing. If you don't show, they'll just garnish your wages and/or take your federal tax returns.

Of course, now that the loans are in default, the interest rate has gone up and all kinds of collection fees have been added, thus the amount you owe is now far greater. Have you checked your credit reports? You may be able to get more information about your loans from there.

The CAs hired by the Guarantor and/or Dept of Ed really can and will recommend you for AWG (and other nastiness) should you continue to jerk their chain. You need to stop talking to them and do something. Either:

A. Consolidate the Default loans (which can be done) or,
B. Rehab the default loans

Rehabing is most often the best way to go. It will remove alot of the derog information from your credit reports and get them out of default. However, it takes at least a year until it is completed, and if you miss even one payment, you will need to start over! Consolidating them will get them out of default faster, but the bad stuff will stay on your CRs and most of the collection fees will be included.