Ready to pay off school loans. Where to start?

March 25, 2008 7:32 PM

I'd like to pay back my student loans. Where to start?

I have student loans that I defaulted on 10 years ago. Yes, I was irresponsible and immature. I'd like to now correct my mistake. But since I'm pretty sure my loans have been sold off to other collectors I'm not sure where to start. I'm not even sure how much I owe, though I believe it's around 10,000.

Who do I contact? Any pointers in the right direction would be great. Thanks.

posted by anonymous to work & money (11 comments total)

Well, keep in mind they are probably not showing up on your credit report now, or they may stop showing up within a year (I don't think anything shows up after 10 years)

On the other hand, if you start making payments the student loans will become "active" and they might start showing up on your credit report. Meaning, your credit may take a hit if you try to find the creditor and start paying them back.

So, make sure to get a copy of your credit report and check to make sure that the loans actually appear before you start trying to find the company that owns your bad debt.

(But seriously? Don't do this. If you're going to, essentially, donate $10k to someone, why not starving kids or a local school rather then some evil down-market collection agency? There are many much better things to do with that money if you want to absolve your conscious.)
posted by delmoi at 8:09 PM on March 25, 2008

Actually, I believe student loan defaults stay on your report for a long, long time. You'll be able to find out both if they are on the report and who holds them by checking out your credit reports (all three of them).
posted by lunasol at 8:19 PM on March 25, 2008

Dittoing delmoi. Your loans were surely written off years ago, and by offering to repay, you will generally be affirming that the loans are still outstanding, thereby subjecting yourself to collection agencies if you determine that you can't pay in full what they think you should owe with interest and any penalties (which could be a bitch). Any money you fork over unbidden is like a present to the loan company / investors who bought your loans. In this day and age where the securitization of debt of all sorts has essentially fucked the global economy, do you really think you need to do this?

PS: you weren't a bad person then, and I'm sure you're an even better person now, as exemplified by your angst over this. Let that be your penance, and keep your money.
posted by Admiral Haddock at 8:19 PM on March 25, 2008

Since no one has mentioned it, go to annualcreditreport.com to get your free credit report. This is the official website setup as a result of the Fair and Accurate Credit Transactions Act. You don't need to pay for your credit report, nor do you need to pay to get your credit score. Any other website you see online or on TV is going to try to sell you something.
posted by andrewdunn at 8:29 PM on March 25, 2008 [1 favorite has favorites]

Take the money you intend to repay, and stick it into a (say, 12 month) term-deposit.

If they contact you in the next year, you're sweet. If they don't, roll the money over and pocket the change. Rinse and repeat.
posted by pompomtom at 8:33 PM on March 25, 2008 [1 favorite has favorites]

If you have several loans, start with those having the highest interest rate. Talk to a financial adviser before you start, just to make sure you're doing it in the most prudent way possible.

As someone who agonizes everyday over having to pay back student loans, it disgusts me to think there are people--not you, OP-- who are shameless about feeling no obligation to repay theirs. We signed a contract promising to repay our loans. Have some integrity, people.
posted by HotPatatta at 8:41 PM on March 25, 2008 [1 favorite has favorites]

The Federal Government can take away your Social Security benefits payments. The IRS can also withhold your tax returns and you may be subject to wage garnishment. The US Supreme Court upheld the government's ability to collect defaulted student loans in this manner without a statute of limitations in Lockhart v US (04-881, December 2005). Even though it has been 10 years, you may be running on borrowed time here.
posted by dendrite at 9:10 PM on March 25, 2008

Assuming your student loans were federal, dendrite is correct. Debts owed to the gov't aren't like other debts. They're forever. Also, don't assume they've been assigned or sold to a collection agency, and if they have don't assume that they cannot be re-assigned to the original creditor.

A friend left the country for 10 years, and ditched the federal student loan payments with it. Upon return, the feds noticed when she started earning money again, and gave two choices: setup a revised payment plan, or everything's going to be garnished until the debt is gone. She said the payment plan terms were extremely reasonable, and they even waived a bunch of the penalties and interest that had piled up. Cool.

Interest is accruing basically forever. If you have the ability and desire to pay it off now, go for it. Contact the department of education, and tell them you'd like to discuss settlement of the account. They'll set you up.

Unfortunately, it's true that it's going to re-appear on your credit report if you don't handle this carefully. Make sure that you do not pay a cent, or even say anything that sounds like agreement to pay a cent, until you've received their written commitment to mark the paid-off account as paid/satisfied (google for "pay for delete"). That way when the account resurfaces on your credit report, it will have transformed to a net positive instead of an old negative. Joy.
posted by nakedcodemonkey at 10:18 PM on March 25, 2008 [1 favorite has favorites]

It's definitely important to find out if the loans are federal or not. If they are federal, they have probably never been sold to a collection agency.
posted by delmoi at 10:29 PM on March 25, 2008

"nor do you need to pay to get your credit score"

Not true. You are legally entitled to a free copy of each of your three credit reports every year, but not to a free credit score.

That said, many places offer a deal where if you sign up for a free trial of their credit monitoring service you can get your credit score as part of the free trial, then cancel before the free trial is up. Make sure that you get your FICO score (that is the one almost everyone actually uses) and check out the reputation of the service offering the free trial to make sure that they won't screw you when you try to cancel. http://www.myfico.com/ is the company that actually originated the FICO scores and is honorable about their free trial.
posted by Jacqueline at 11:19 PM on March 25, 2008

I'm rehabbing mine right now that are 18 years old. I am paying $82 a month, direct debit for 10 months and then my credit report will be updated in November to "pays as agreed". My defaulted status was on my credit report 10 years ago when I bought my first house and nearly cost me the loan. My original $2800 loan has ballooned up to roughly $6k with fees and interest and I graduated from college in 1990. I"m going this way in order to get it fixed on my credit rather than just "paid in full-late" showing up.
posted by hollygoheavy at 8:55 AM on March 27, 2008