20 years ago I stuck it to the man. Now what?
June 3, 2012 12:31 AM   Subscribe

How do I go about repaying 20+ year-old student loan debt?

When I was in my 20s I made some really stupid financial choices. I ended up w/ maybe $40k in student load debt + tons of other debt. I declared bankruptcy in about '94 and left the USA in '96. I now live in Europe and have a successful professional life complete w/ mortgage.

But I've never repaid my student loans. Over the years my debts got sold to various collection agencies. I managed to get so far off the grid that the collection agencies stopped calling my family. They have seemingly given up. But now I am considering paying back the money if I can do so on terms that are favorable to me.

My question is...how can I do this w/out inviting those collection agencies back into my life? I no longer have any paperwork about those loans whatsoever. Is there some type of lawyer of private detective I could hire to figure out how much I owe and who I owe it to?

Finally, I want to do this on my terms. I am willing to pay the capital, but no interest (please reserve your moral judgment). Any strategies on how to go about this?
posted by anonymous to Education (18 answers total) 9 users marked this as a favorite
I'd start by not disclosing my real name and location on the intarwebs.
posted by Yowser at 12:39 AM on June 3, 2012 [4 favorites]

Sounds like you should hire an attorney to act as an intermediary. If you communicate with the collection agencies through a legal representative, you should be able to maintain a pretty high degree of personal anonymity.

I am willing to pay the capital, but no interest (please reserve your moral judgment). Any strategies on how to go about this?

Morality is not at issue here. This is business and in business everything is negotiable.

Keep in mind that collection agencies buy this debt greatly discounted. Less than 50% on the dollar of the original debt. Even only recovering the original loan amount puts a nice profit into their pockets. If they can convince one of their assumed deadbeats to come fully correct with all of the interest and penalties as well, they make a very large return on investment. That's their business model.

Your starting offer should be the same amount of money you imagine they paid for it (no one sells anything at a loss) say $20k and then go from there.

The agency will weigh the costs of settling with the costs and risks of recovery of the full amount and then they make a business decision.

Then the attorney you hired can help you write a settlement agreement that fully disposes of everything.
posted by three blind mice at 2:12 AM on June 3, 2012

contact the mods and ask them to make this anonymous.
posted by changeling at 2:53 AM on June 3, 2012

Mod note: anonymized this for the poster
posted by taz (staff) at 3:22 AM on June 3, 2012

Morality aside, are you entirely sure you are still required to pay them? There are statutes of limitations on defaulted debt, which vary but you are almost certainly well out of that interval. In addition, you no longer live in the United States, so it is unlikely that any collections agencies would put in any effort to attempt to recover the debt.

If you just feel morally obligated to repay this, you can. The collection agencies that bought that debt are likely junk debt buyers (JDB) and would take likely discuss a settlement offer with you for a portion of your debt, how much however, I'm not sure. I mean, let's face it...people usually don't repay 20 year old debt that isn't haunting them anymore in the form of a horrid credit score and harassing phone calls.

I wouldn't approach them with the phrase, I want to do this on my terms. I am willing to pay the capital, but no interest but more of the attitude that I want to settle this account and I'm offering X percentage of the balance owed.

The toughest part may be finding out how owns this debt, however you can pull your full US credit reports (Experian, Transunion, Equifax) and see if there have been credit inquiries in the last few years or so and see which agencies were likely to have collected then. No guarantees that they still own the debt now, though.
posted by Asherah at 3:24 AM on June 3, 2012 [2 favorites]

The problem with making any payment is that, under the laws of some states at least, doing so may revive the claim that otherwise is barred under the statute of limitations.
posted by yclipse at 4:01 AM on June 3, 2012 [2 favorites]

There are statutes of limitations that may be in play. Contact a consumer rights attorney in your state to see what they're going to be. For example, Indiana requires a lawsuit based on a loan to be commenced within six years. But even if they did that and got a judgment, the judgment itself expires after twenty. Different states have different rules. But it's been long enough that the debt may actually be retired.

You want to be really, really careful about this, because reaffirming the debt will reset that clock and take you right back to where you were twenty years ago, i.e., owing the whole thing. With interest.

And the interest is going to matter. Screw the morality of the thing, statute of limitations issues aside, you owe them a crap ton of money. $40k loaned at 5% interest twenty years ago is now over $100k. The idea that you can somehow pay the $40k while ignoring the rest of it just isn't going to fly. There's going to have to be some kind of reckoning there.
posted by valkyryn at 4:55 AM on June 3, 2012 [3 favorites]

Off the wall suggestion, based on what I've read above: Assuming that, legally, you're not obligated to pay this debt back to the collection agency, why not make a contribution to your old school or program (or some other charity)? You could come up with some kind of number based on what you remember of your unpaid debt, and either donate that full amount at once, or start sending them periodic checks.

You say to reserve moral judgment, but there must be some kind of moral itch you're trying to scratch here by thinking about this at all. Kill two birds: make the itch go away by repaying your debt, and give the money to an institution that will use it for something good, rather than lining the pockets of debt collectors.
posted by SuperSquirrel at 5:57 AM on June 3, 2012 [5 favorites]

At the time those loans were dischargeable and should have been discharged in the bankruptcy. Are you sure they aren't irrelevant?
posted by Rubbstone at 6:09 AM on June 3, 2012 [2 favorites]

Odds are you have no legal obligation on that debt at this point. I'd let this sleeping doe lie. If you need to do something make peace with your conscious, donate to charity or your alma mater.
posted by COD at 6:16 AM on June 3, 2012

At the time those loans were dischargeable and should have been discharged in the bankruptcy.

This is a good point. Student loans didn't become almost impossible to discharge until 1998. If you filed in 1994, this may already have been taken care of.

Again, check with a lawyer.
posted by valkyryn at 7:17 AM on June 3, 2012 [2 favorites]

Why do you want to do this? If it is out of some moral/ethical (as opposed to practical or legal) consideration, the aggravation might be less for you if you just took the money that you would have paid for the loans and instead donated it to a worthy cause. This is especially true of you find, as many have already suggested, that you're legally off the hook for this money.

Your alma mater almost certainly has a robust alumni donations network, and you can probably earmark your donation to go towards financial aid grants. I'm sure you could also find a non-profit that helps young people develop financial literacy. Both of these might be morally appropriate choices.
posted by dendrochronologizer at 9:40 AM on June 3, 2012

If you went through bankruptcy and had your loans discharged, you don't have any more loans as far as your lenders are concerned. If they weren't discharged, then as other posters have mentioned any payment at all could reset the statute of limitations -- so you would be right back in $100,000+ worth of debt, which would mean the potential for collection agencies, garnishment, etc. all over again.

I am not your lawyer, but DO NOT DO THIS.

Look at it this way — bankruptcy isn't a way to cheat, it's part of the bargain. The US decided long ago that offering a mechanism for bankruptcy was preferable to debtors' prisons, and your lenders priced the risk of bankruptcy into the terms they offered you. So you really shouldn't think that you have a moral obligation to pay your bank back — believe me, they would not have the same feeling toward you.

As others have said, if you feel like you must make some restitution, a donation to needy students would be a much nicer way to do it.
posted by electric_counterpoint at 9:58 AM on June 3, 2012 [3 favorites]

Just noting, for clarification to electric_counterpoint, that as a general rule student loans aren't discharged in bankruptcy. So the "bargain" of bankruptcy is most likely beside the point. In the case of student loans the US has actually decided that offering a mechanism for bankruptcy will hurt young people who need credit for education (or will hurt political powerful financial institutions, depending on who you ask).

There are occasionally exceptions, but the OP says that his loans weren't discharged, and he is probably right about that.
posted by willbaude at 12:47 PM on June 3, 2012

Willbaude, as Valkyrn says, these loans and the bankruptcy are so old that different laws applied. The op may well be wrong in this case.
posted by jacalata at 1:07 PM on June 3, 2012 [1 favorite]

As others have said, you really need to find out what the law is before you decide what to do.

If you no longer have a legal obligation to repay, but you feel you have a moral obligation to do so, consider making a contribution to charity instead. Apart from the impracticality of finding out which debt collection agency took over the debts, your money might make a bigger difference elsewhere.
posted by robcorr at 3:10 PM on June 3, 2012

You don't need a lawyer or a PI to find out how much you owe.

If you're talking about federal loans (vs. private loans) you can access all of your information via the National Student Loan Database System which is completely free.

First, you will need to apply for a PIN here (if you're worried about anonymity, don't use your real address or email address). Yoou will get your PIN instantly, but it will take a 1-3 business days for the Social Security administration to verify your info. After your PIN is verified (you may not receive a notice), you can access the NSLDS and get information about the status of your loans and who owns them.

I work for a non-profit organization that provides assistance free of charge to people who have defaulted on their student loans. There are several other similar organizations across the country. If you send me a MeMail with your city and state, I can refer you to organizations close to you that can act as a liaison between you and the credit agencies.
posted by chara at 3:19 PM on June 3, 2012 [1 favorite]

Mea culpa.
posted by willbaude at 5:51 PM on June 3, 2012

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