Student Loand fee of over $10K in three months!

[TakenForGranted]

What is the name of your state (only U.S. law)? NY

I have a few outstanding student loans - which were in deferrment last year due to me not working. Apparently, the deferrment expired - I had moved so things got a little away from me. I received a letter from the collection agency telling me that they were going to be taking my tax refund and any social security I will be receiving or currently receive. First, I thought social security was not allowed to be garnished - when I called the to explain that I didn't agree with the letter or the amounts due, they informed me that I owe more now than I did three months ago because they charged me a interest fee totaling over $10K in less than three months. I don't know why they do that, if I am not able to make the normal payments, what is adding $10K onto it going to do. My questions is, I know there is a hardship bankruptcy available, but very hard to get. I am a single mother of four and provide the only income in the home and receive little to none in child support. I can't pay the bills I have now, let alone $200 a month (what they want to stop seizing my taxes). I asked that they send me details in writing of their plan and options but they refused saying I had to give them my checking account information and post date 9 checks in order for them to mail me anything - sounds fishy to me. What can I do - this is getting completely out of hand. I am more than willing to accept a reasonable payment plan, but this is ridiculous! Thanks for any advise!

[ecmst12]

How much was the original loan? Was it on DEFERRMENT or FORBEARANCE? Forbearance means you don't have to pay, but interest still accrues. That could explain the extra $10k, it's been accruing since you graduated not just 3 months.

At any rate....student loans NEVER GO AWAY. They are not dischargeable in bankruptcy and they will follow you to the grave and they have much more power to force you to pay then ordinary debts. Now that you are in default, they will take your refund, no dubt about it, every year until it is paid off, unless you bring your account current. It is probably also too late to get a hardship deferrment since you are already in default, even if you would qualify.

[TakenForGranted]

I am not sure what the original loan amounts were - they are from a few years ago for seperate degrees I obtained. The woman on the phone did tell me that the $10K fee was accumulated in the last three months - not over the period of the loan. She said it is a fee that is charged. The loans were in Deferrment, not forebarance, and apparently were up for renewal but since I moved, I didn't get any notices in the mail, though I left a forwarding address. She tried to tell me that it just so happened that the day I called was the last day to make a payment arrangement and give her $200 (which I don't have - I am paid bi-weekly and just paid rent). I know I owe the money but can't do $200 a month - I cant' have them taking my taxes every year either - I will never get my taxes back again.

Ugh!

[seniorjudge]

Originally Posted by TakenForGranted

...
She tried to tell me that it just so happened that the day I called was the last day to make a payment arrangement and give her $200 (which I don't have - I am paid bi-weekly and just paid rent).
...

This is a collection agency telling you this; not the student loan people.

Since it has already gone to a collection agency, you are stuck with them.

[Slammedtgs]

Well, there are several thing that can be done. Since filing bankruptcy will do nothing, it would not be prudent to do. You can try to negotiate with the collection agency, since they likely paid 50% or less of the face value you may be able to negotiate better term or a reduced cost.

Try to get a private loan, you may need a cosigner to obtain this. Once pre-approved for the amount offer to pay the lender in full the amount you are approved for, or an agreed upon amount. Assuming you and the collection agency come to an agreement get it in writing before payment is made that the payment will settle all debt on account and no further collection on the debt will be made.

To prevent the collection agency from taking your tax return, add dependents to your w-4 (not sure of if thats the correct form). This will put more money in your pocket each week, and will make you pay the government at the end of the year.. Be sure to set the additional money aside, as you dont want the IRS coming to look for their money. Or calculate the amount that you over pay, and reduce withholding by only that amount so you break even at the end of the year, and dont over pay the IRS (check with the HR department on the legalities of this)