Are there any student loan repayment help agencies?

September 17, 2008 3:21 PM

Are there any credit counseling or 3rd party agencies that work with student loan repayments?

My husband has a substantial student loan. Health problems hit both of us this year, I'm unable to work, thus we're unable to pay the full $300/month for now and want to lower payments. We have every reason to believe we can go back to $300/month in 12-18 months.

His student loan company is terrible, constantly making errors and they employ completely unhelpful customer service people. They say he's ineligible for any more deferments or forbearances and they claim he's on a graded repayment schedule but it made no difference in payment amount. He offered $200/month payments and they hung up on him.

Is there any kind of third party agency that can help us? I don't even really know what I'm looking for, but a web search isn't revealing anything except government pages threatening those who don't repay.

Or are we just stuck?

posted by smashingstars to work & money (16 comments total)

You can always consolidate the loan. I have my student loan through Citibank, and they've been willing to work with me regarding payment amounts.
posted by desjardins at 3:33 PM on September 17, 2008

It's a really bad time to be talking about this, but you can always talk to your bank. Consolidation loans are available from most major commercial lenders.

Unfortunately, we're in the middle of the biggest financial crisis since 1929, so credit is going to be a lot harder to come by in the coming days.
posted by valkyryn at 3:39 PM on September 17, 2008

I forgot to mention the loan was consolidated years ago, so it's not an option.
posted by smashingstars at 3:51 PM on September 17, 2008

Credit counseling, as I understand it, is a bad deal, and should be avoided.

If the student loan people won't work out a reasonable payment schedule with you, just pay whatever you can (a consistent amount each month), and be very up front with them (like, put it in writing, and send it to them via certified mail with a return receipt) that that's exactly what you're doing. Document the fact that you are trying, to the best of your ability, to pay the debt. Increase your payment as soon as you can so you can get this cleared up.

Option B is to simply not pay them for a couple years, then wait for them to come after you and offer them $0.50 on the dollar to settle the debt.
posted by sportbucket at 4:01 PM on September 17, 2008

Both of sportbucket's options will fuck your credit up. They don't care about good faith efforts. They're going to report your ass to the Big 3 if you underpay or don't pay. I can't imagine that credit counseling would be any WORSE than this.
posted by desjardins at 4:04 PM on September 17, 2008

Well yeah, but it should go without saying that if you can't pay your debts, your credit will suffer.
posted by sportbucket at 4:14 PM on September 17, 2008

But if the monthly payment is lowered temporarily, I don't see where that would cause our credit to suffer At least as long as we make the new lower payments. Maybe I'm missing something?
posted by smashingstars at 4:16 PM on September 17, 2008

My understanding is that even if you go into credit counseling, that doesn't necessarily guarantee that the creditors won't still report you to the credit reporting agencies. Credit counseling isn't something that pays off the full debt, and that's really all that the creditor is interested in.

Making lower payments (whether the creditor seems to agree with the arrangement or whether you make the lower payment without them agreeing to it) doesn't matter to the creditor. They'll take the money, but they're still going to report the debt.
posted by blucevalo at 4:26 PM on September 17, 2008

I'm not really qualified to offer you financial advice, but as I understand it, entering credit counseling has a similar effect on your credit as a chapter 13 bankruptcy.

The main problem is that the student loan people are being douchebags, and if they really want to get paid, they'll make you a deal. It sounds like they don't really believe that you can't pay. And, as long as you're staying current, they don't have much incentive to try to work something out with you.

Health problems seem like a fine reason for a hardship deferral. Look into that again. Or maybe offer them a lump sum in exchange for of a reduced monthly payment.

Get some financial counseling, sure, but don't sign onto one of those deals where you pay someone to pay your debts for you. 'Cause what happens if they don't pay? It's your ass on the line, not theirs.

Your credit's probably going to suffer no matter what, but that's honestly not the end of the world. Get the debt out of your life -- your credit will recover.
posted by sportbucket at 4:29 PM on September 17, 2008

Credit counseling agencies work with banks and credit card companies, and in lots of cases are funded by them, so one might assume they're not exactly working in your best interests.

They are designed more for people who have credit card debt, not so much student loans.

Also, if your husband's loans are consolidated through the US Dept of Education, the credit counseling services won't be able to help you in any other way than to look at your expenses and debts and help you put together a budget - something you've hopefully already done on your own.
posted by M.C. Lo-Carb! at 4:33 PM on September 17, 2008

Ah, okay. I haven't entered credit counseling and didn't realize it affected your credit in that way. We have a mortgage and a single credit card, and the student loans of course, but no other debt. Not even car loans.

We'll look into hardship deferral again, but I suspect they won't care. I don't really want to stop paying them to force them to deal with the issue, but $300/month has tapped out our meager investment savings (which has lost 1/3 of its value thanks to the economy, and I suspect has lost even more in the last few days). If it's a choice between paying mortgage and the student loan, the mortgage will win.

Thanks for the help, guys.
posted by smashingstars at 4:37 PM on September 17, 2008

even if you consolidated with a bank you can still consolidate with the federal govt under the direct loan program...or it used to be an option. And then you have 4 different repayment options, some of which are very forgiving--but it takes a few months to go through. the link is to the eligibility requirements.
posted by beckish at 5:20 PM on September 17, 2008

If you need some help with talking to your student loan company, try the ombudsman, who is designed to help when it's problematic:

http://www.ombudsman.ed.gov/

Good luck - I have to go for an appointment, but will try to post back later with other ideas - I was in the student loan industry for 8 years as IT.
posted by ugf at 6:36 PM on September 17, 2008

I'm fairly certain that the advice above applies only if the loan is originally from the federal government and/or is a Direct Loan (Stafford, Perkins, etc.). Private lenders are a lot less forgiving and a lot less willing to work with the debtor. And more and more student loans these days are private loans. (More on private versus federal loans.)
posted by blucevalo at 9:58 PM on September 17, 2008

My husband had several Perkins and Stafford loans which went through Direct Loans. We paid them a bit off and on until my husband decided to consolidate them with a private company called Nelnet. I don't think the ombudsman has jurisdiction anymore.
posted by smashingstars at 2:58 AM on September 18, 2008

Not sure if you are still checking this, but even though Nelnet is holding the loans, they still have to follow the federal guidelines for them. Consolidation loans are still something that the ombudsman can discuss with you.
posted by ugf at 9:56 AM on September 25, 2008