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US Dept of Ed Ombudsman Question

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  • US Dept of Ed Ombudsman Question

    Has anyone ever used them?

    Forgive me, this is super long but I am really hoping to get some sort of advice.

    I have a $1500 Perkins Loan that is in default. There have been lots of shady happenings with my lender since I entered repayment status about 3 years ago. I have appox. $45k in other student loans through a different lender that are perfect; I have had no issues getting deferments processed, forbearance granted, or making payments for that matter on the other bulk of my loans. Last Spring after not hearing anything from my Perkins Lender (SUNY Student Loan Service Center) I called to find out when my previous deferment was up. It was already past due at that point and I had not received any paperwork. They had an incorrect address for me, got everything up to date and began processing a deferment. I submitted paperwork, a month went by, nothing was processed. In June I received a letter letting me know that my loan was going to be seriously late. I called again and they said I needed to resubmit the form along with a $14 late fee payment and the deferment would be processed. This is where things when really bad and I take partial responsibility since I completely and honestly forgot to return the form. It was the month we had retained our lawyer and there were a million and one things going on. Honestly never even thought about it since I had already mailed in the paperwork TWICE. So fast forward to October when I get a letter from a collection agency telling me I am in default. I told him that I would be filing BK and there would literally be no money for me to pay him... I couldn't even make my $40 min payments from the loan before. Right from the get go he started pressuring me to Consolidate all my loans which meant that for one $1500 loan, my interest rates would increase on all other $45k! I kept asking for another option but was told there wasn't any. I started my consolidation application because it really seemed like there was no other choice. By chance I happened to get a letter from the consolidation lender and found out about loan rehabilitation which would not only put me back in good standing, but also remove the default from my credit report. This would be a HUGE help since I will also have that nice Ch7 on there. I also found out it HAD to be offered to me. Called the lender, they referred me to the collection agency. So I asked the Collections rep. He says sure, we can do that but I would have to pay OFF my loan in 9 consecutive payments. So I tell him that it says I have the right to an affordable payment plan. At this point he started becoming very unfriendly once he realized I wasn't going to just consolidate so he could get paid. He told me that SUNY has exceptions to the Dept of Ed rules and that is how they do the loan rehabs. I contacted an Ombudsman (December) and at this point the Lender is having a compliance charge filed against them since they ARE required by law to 1) offer loan rehab and 2) offer a payment plan. It has been discovered that they are forcing people into consolidating so they get paid off and for the people that find out about and decide to go for a rehab and pay off the loan in 9 months, it is showing as Paid in Full and at that point the default cannot be removed. The lender has hung up on the Ombudsman's & FSA Compliance offices. The Ombudsman does not want me to consolidate because then they have to drop their investigation since the loan would essentially be paid off. Before we filed, SUNY SLSC tried to keep my state tax return. I did file for injured spouse since none of the refund was mine (I owed state tax) and am really worried that when they find out about that they will be looking to garnish my wages. I am really ticked off that the laws are being broken and there seems to be little that I can do. I would really like that default gone, but at the same time if I consolidate this can all just go away for now even though I will really be paying for it in the long run. Is it worth trying to get a lawyer involved? I don't even know what kind to look for!

    If you've made it this far, thanks... and any suggestions??

  • #2
    This is a federal loan right? Yes, they have to offer you loan rehab and income sensitive payments. What I don't know for sure is if they have to do any of that if your loan has defaulted. I'm guessing probably not. Definitely consult a lawyer - it might be hard to find one that knows specifically about student loans. Please don't sign anything about consolidation until you talk to somebody about it though.


    • #3
      In case anyone was wondering about the status of this...

      I contacted a lawyer and regardless of default, the lender is REQUIRED to offer loan rehab AND income sensitive payments per federal reg. Unfortunately I still risk the lender being uncooperative and garnishing my wages since that will happen much quicker than the lawyer can fight them on it. The lender won't even speak with the lawyer or Ombudsman until after our case is closed.

      We received our discharge yesterday and while that is good news, now I have to worry about the $50k in student loans that have been on hold the past few months... There's still not enough extra $$ every month to pay those payments. I'm convinced I'll die with student loans looming over my head; worst investment ever.


      • #4
        Student loans can be great to get you through school, but in the end it sucks no matter how you look at it. I understand what you are going through. By the time i finish with school I will have about 45K-60K in student loans. I am also not pleased with the state requirements to enter my program. I just took a state mandated test that cost me 170 dollars. I got the results in and I did not pass. Problem is I missed the passing score by 1 point. Now I have to pay another 120 dollars to retake the test and this delays my graduation by a semester. Meaning I have to stay in school no matter what until I pass the test, otherwise I will have to start paying back my loans. I can not afford to start paying them back until I finish school and actually have a job that pays more than what I am making now (right now I am not making much money).

        The company I was with closed back in 12/2008, and I got the run around when I tried to look for a job. I had tons of experience, but no degree. Now I am almost done with the degree, but it does not mean I will find a job. I feel like it is not a win-win situation, because I will have to continue paying student loan debts for a long time. Without the degree though I had no chance of even finding a job that paid 1/2 of what I was making. It is sad that we have to go into debt just to get a degree. I mean many jobs still do training that the books do not teach you. I am just venting right now, but I hope you get something worked out with your lender.
        Chapter 7 filed on 4/23/2010
        341 meeting on 5/28/2010
        Discharged on 8/19/2010


        • #5
          Another update: after the lender received notice of my discharge, they yanked the loan out of collections; I pulled my credit report and don't even show a default... The lender did send a letter saying the balance was past due (not defaulted) and needed to be paid in full, but the Ombudsman again reiterated I am requesting loan rehabilitation. The lender again tried to say rehabilitation payments would be $178/mo for 9 months but the Ombudsman advised they needed to send me a Rehab Financial Sheet in order to calculate the payment. The person on the phone was reluctant to do so, but after repeatedly asking me "You cannot afford the $178?" I think I got the point across and they are supposed to send it out. Fingers crossed this goes as planned...


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