What happens after collections, and when will I be able to re-attend?

scarlethands · December 9, 2013, 6:18am

First off, I’m a newbie on this forum but I have looked through the FinAid forums to try to find an answer to my question. Unfortunately, none of the posts I’ve looked at seem to really fit my situation. Also, this is going to be kind of long so get comfortable.

This current Fall semester I was supposed to go on a study abroad trip to France (I was a French major at the time, but have since switched to a different major in the past several months). I got my aid in early August, which was around $11k (they disbursed ALL the funds to me since I would have the pay the French university directly), and then paid for my plane ticket, pre-paid some of my bills for the duration that I’d be gone, as well as anything else that I needed to pay for. So before I even left about 1/3 if not almost half of the money was already spent.

So, I arrive in France. I’ve been to France before, hell I’ve been to 13 countries. I love traveling and I France, this should be fine, it should be fun. Well, actually, no. It’s not. I completely freak out with full on black out panic attacks which I’ve never had, or had anything close to that in my life since I’m a pretty mellow, level-headed person. I’m not able to function, I’m in physical pain, and am in no shape to to be able to attend classes in a completely foreign language. So I decided the best thing for me to do was leave. There were other contributing factors as to why I left, and why I was having panic attacks, but that’s the basic story as to how I came to be in the mess that I am currently in. The rest is personal, and not relevant to what my current situation is.

I get back home and immediately work on trying to drop from the semester as it was already about 3+ weeks into the semester at home and I wouldn’t have been able to sign up for normal classes. I speak with my advisers and the financial aid office trying to figure out what I needed to do. I successfully drop from the semester, and was told that I would need to pay back some of my loan. Keyword: SOME. The advisers that I spoke to at financial aid said I would probably not have to pay back the full amount and there would be options for repaying what I owed. Considering I had already spent a good deal of the money before I left, and then more in order to change my flights and get back home I was okay with paying a partial amount of the loan.

At this point it was just a waiting game to see what information the school got back to me with regarding what I owed. I think it was a month and a half later when I checked my student site (where I add/drop classes, check on my loans, etc.) as I had been doing every day just in case that I find that I have a past due balance of around $11k, the full amount of my loans. I didn’t get a call or an e-mail about it, and may not have known about it if I wasn’t checking that page religiously. But you know, whatever. It was there, I knew about it then, so fine, let’s just move on.

I went ahead and paid what I could, $1500 with the money I had left (I had to pay my bills as well contribute some of the money to my family during those months) and called the financial aid office to see what was up. They said that I owed the full amount, that they didn’t know why the person I spoke to before told me I wouldn’t have to pay the full amount, and that there were no payment options they could offer in order to pay it off. They also told me that until it was paid off I wouldn’t be able to attend anymore classes, and if I didn’t pay it off by Jan 15 that it would be sent to collections. Well, that really friggin’ sucks. But it is what it is, and I just have to do what needs to be done.

Now, ever since I’ve gotten back home I’ve been looking for a job as I knew I had to pay back the loan as well as pay all my other bills. Sending out about 10-15 applications a day on craigslist, monster, and applying to jobs directly on their websites. I had maybe two interviews between the time I started applying (late August) until about late November when I got hired for a seasonal part time job at a store in the mall paying $8.50 an hour working roughly 18-20 hours a week. Doing the math on that, I wont be able to pay off the $9K+ loan for well over a year. I still haven’t been able to find a 2nd, let alone a 3rd job to make extra money.

To top it all off, I found out last week that the one job I do have is going to be closing for remodeling and wont be opening again until April, thus resulting in everyone at the store getting laid off. So I’m back at square one, and that’s where I’m at right now.

There are also some other things I should add to help clarify my situation, since I know there will be some people who will answer with suggestions that may not be possible for me, or I’ve already tried them.

I already live with my parents, who are both unemployed. My mother is on disability and we all (my mom, dad, my two bothers and myself) live off her social security checks. My dad is a full time student, so his financial aid helps supplement our monthly income. They both have terrible credit.

I, too, have terrible credit. So there’s no hope in me getting a loan from a bank even with my parents as co-signers.

As I’ve already said before, I’m already looking for work. For Any work. I’m this close to selling my body on e-bay. So trust me, I’m working my butt off to get jobs to pay this loan off.

I have already been to and have graduated from Community College with an AA.

Normally with financial aid my school is entirely affordable. Each semester is somewhere between $4-$5k, and I get about $10-$11k each semester. So it’s not a case where I’m going to a school that is, I guess you could say, above my means. It’s the cheapest 4 year school in my area. As long as I’m in school receiving financial aid I’m able to live off my refund and pay all my bills with no problems.

I’ve exhausted all my options in regards to speaking to my academic and financial aid advisers. My school isn’t the best when it comes to giving students straight answers, and will Always give me the run around. Their website isn’t much help either.

The past due amount that I owe isn’t for my actual loans with Sallie Mae, which I’ve already had to start paying back as my 6 month grace period is up. It’s with my actual school, since they paid the lender back so I subsequently have to pay the school back.

Most importantly, Yes I know I got into this mess all on my own. I know I have to pay my loans back, I knew that when I registered for school. I know these are grown up problems and I have to be a big girl and deal with it. Trust me, I know all that, and I’m working my ass off trying to sort it all out. If I have to work for the next 3 years, or even the next 15 years to pay off the loan in order to get back into school I will. I wish and hope there’s a way I can get back into school sooner, but I know realistically that’s not going to be the case. So please hold back a bit when you’re scolding me, 'cause I do know all these things and I feel pretty damn guilty already.

So after All that back story, my questions to you guys are:

What can I expect to happen after my loan goes to collections? 'Cause it will, I have no chance of being able to pay it off before the due date. What will the payments be like, and what kind of options, if any, do I have for payments?

When can I expect to be able to re-enroll in classes again? Will it have to be after the past due balance is completely paid off, or is there a chance I can register after I’ve paid off a portion of it?

How does going to collections affect my SAP and my eligibility for Financial Aid in the future?

Any kind of help or information you guys can give me would be immensely helpful. I’m really at a loss as to what’s going to happen, or what I can do. All I know I CAN do is get a job, or multiple jobs in order to pay off the loan. So I would be so grateful with any kind of information you guys can give me.

Thanks.

thumper1 · December 9, 2013, 9:00am

Do NOT let your loan go to collections. Try to arrange a payment plan with your college.

How much of a loan did you have? If it was a direct loan, and you were a junior, it would be $3750 for the semester…is that correct?

Since you withdrew from all of your courses and received NO credit for the term, I would think that full amount would have to be repaid. Basically, you were not a college student for this term.

I could be wrong…but I THINK you can request the FULL Direct Loan for your next term. Find out if this is possible (other factors come into play like whether your award would be in excess of the cost of attendance). Plus, I’m not sure I’m even right.

If I am correct, you would need to repay this loan from this term ASAP. Could you borrow the amount from someone? Then IF you can request the full $7500 for next semester (remember…I’m not sure about this!!!), you could repay them when you receive a refund.

scarlethands · December 10, 2013, 2:17am

Thanks for your reply. :)

I’m actually a senior receiving roughly about $10,000 a semester. I get a pell grant, Texas public education grant, a direct sub and a direct unsub loan. I received $11,000 for the fall semester since I received a $1000 study abroad scholarship that my school typically gives out to students studying abroad. I already paid $1,500 towards the loan so it leaves me with about $9,000 still currently owed.

What is and how would I receive a full direct loan? Is it the same loans I would get from financial aid? I was hoping that I would get my regular loans for next semester as then I’d be able to pay off my current loan with no problems, but the financial aid office told me I wouldn’t receive any loans for next semester without paying off last semesters loan.

From what my school has told me, there are no options to pay off my loan. One adviser at the financial aid office suggested that I take out a loan at a bank. I wanted to say “If I was able to get approved for a loan at a bank, don’t you think I would have done that already?”, but I held my tongue and told her I’m not able to do that with my credit.

There’s no way I can borrow the money. All of my family, including extended family are having to keep tight budgets with very little extra money after bills, sometimes not able to make ends meet some months. All of my friends are poor college students, an I wouldn’t feel comfortable asking them for such a substantial amount of money even as a loan. So my sources for other loans are slim to none.

Thank you again for the reply, I appreciate you reading through my novel of a post lol.

-W

BrownParent · December 10, 2013, 3:37am

tl;dr

This is a sorry situation. There’s a lot of shoulda coulda here. Always unearned aid has to be repaid. Usually you earn a percentage of the Federal Aid depending on how long you attended the semester. It looks like the college is calculating based on you not having attended any percent of the semester. Read about how return of Title IV funds are calculated. Get the withdraw date from the college.

Be aware that when you are not a student all your loans comes out of deferment and begin to need to be repaid, usually starting at 6 months. Refer to your loan agreement for timing and monthly payment amount. Also the timing will depend on the official withdraw date.

Only your college can tell you when you can take classes again. It is not usual for a college to allow a student to attend until the funds have been repaid. After all, the college is also out the money because they have to return those funds to the Govt. Read up about your school SAP policy, as that is another consideration for when you will be eligible for federal funds again.

I would certainly put your request for a payment plan in writing and submit it officially. Also with a SHORT explanation of the extenuating circumstances that caused you to withdraw.

If the debt goes to collections then you will get a lot of phone calls and letters demanding repayment. google to find out what to expect when you get a debt that goes to collections.

Do you have any assets to sell? A car? Do your parents have any equity on the home they can take a loan for? Can you think of a clever internet stunt to get people to give you money?

swimcatsmom · December 10, 2013, 9:12am

Financial aid has to be repaid when a student withdraws completely without completing a certain % of the semester (usually around 60% I think). My understanding is that repayment is based on the amount of aid earned by attending classes - not the official withdrawal date but actual attendance. You are having to repay everything because you did not actually attend at all. (The amount of money you actually spent would not factor in).

If there is any way to avoid the debt going into collections, then focus on that for now. When debts go into collections, they can increase quite a bit due to fees so you will be worse off than you are now. I would be very surprised if the school lets you start attending again until the debt is paid off in full. That’s usually the way it happens. You will probably also be ineligible for any aid, including federal loans, until the debt is paid.

BrownParent · December 10, 2013, 12:46pm

Well, I didn’t want to get into it since I can’t find a good Federal page to cite, but 60% attendance is the point at which you wouldn’t owe federal money back. Attending less than that triggers a prorating formula… For instance, if you attended 30% of the course, you’d owe 70% back.

The following formula is used to determine unearned aid that has to be returned:

Percent earned = number of calendar days completed up to the withdrawal date divided by total calendar days in the payment period (less any scheduled breaks that are at least 5 days long)

Percent unearned = 100 percent minus percent earned

scarlethands · December 10, 2013, 7:50pm

Thanks all!

At this point I know that I have to pay the full amount and why, it’s just a matter of how to pay it.

I really don’t have anything to sell. If I sold my car I wouldn’t even be able to get to school at that point (it’s a 45 minute drive to school). My parents can Barely pay the mortgage each month, and as far as I know there is no equity on the house. My parents had to file for bankruptcy a couple years ago and they have had money problems since before I can even remember.

I’ve also had to start paying Sallie Mae (my financial aid lender) back monthly as my 6 months grace period is up, so I definitely know about that part.

I’m going to try to call the financial aid office tomorrow and keep hammering them about a payment plan I can get into, 'cause every time I’ve asked they’ve said there are no payment plans available. It just seems so strange that they wouldn’t have any kind of payment plan, otherwise how do they plan to get the loan paid back especially since they’re dealing with poor college students?

BrownParent · December 11, 2013, 3:07am

Well they are not a bank, so they are not in the business of lending money, so I’m not surprised they don’t have payment plans. This is a different situation than federal loans, where it is through the gov’t, not the college who lends the money and has repayment plans. In this case, the college is out-of-pocket because you kept money you weren’t eligible for and they in turn have to return it to the govt. Now you are a creditor of theirs. Even if they were willing, it is likely that they don’t have staff to process loan/payments and come after delinquent payments, so they farm it out to collection agencies, who are in that business. Either the collection agency will have a contract and get a percentage while the college is still the creditor, or they will just sell the debt outright at a steep discount. Either way the college takes a financial hit from this transaction.

rmldad · December 11, 2013, 8:43am

scarlethands wrote:

As BrownParent posted, the college is not a bank. How do you suppose the college’s employees would react if the college notified them that their paychecks would need to be delayed due to student payment plans? The college has made payment commitments based on income expectations.

The college has contingency plans if the income expectations are not met. However, many young people don’t realize how expensive payment plans are for any creditor to administer. Selling your debt to a collection agency for 50% payment is far cheaper for them (based on actuarial calculations) than setting up students on payment plans directly.

kmcmom13 · December 12, 2013, 6:16pm

Okay, here’s something that might help – stay with me a spell and follow it all the way through:

<ol>
<li>Sally Mae is not advertising it BUT if you can first consolidate your student loans (obviously this doesn’t include the U. payback) and if your loans were all after 2007 and included 2011, you will be eligible for the PAY AS YOU EARN program.</li>
</ol>

To consolidate, first go to: [Direct</a> Consolidation Loans - Welcome!!!](<a href=“http://www.loanconsolidation.ed.gov/]Direct”>http://www.loanconsolidation.ed.gov/)
Once you’ve signed the MPN to consolidate, call up Sally Mae and ask for forebearance while your loan is in consolidation. They will give you three months.

Under PAY AS YOU EARN program, your payback amount is rated according to your earnings, which in your case, would net $0 payment required. The federal govt will pick up the interest so that it doesn’t balloon for up to three years. You must prove every year what your earnings are, and your repayment amount is adjusted. If you are eligible for this fed program SALLY MAE MUST GIVE IT TO YOU.

After 20 years, if there is still a balance BUT if you haven’t MISSED any payments, the government will forgive the loan (but treat it as taxable income in that year.)

SO, that will get the Sally Mae monkey off your back for at least a year until you have to verify your income again.

Next, though I know you know this, you can do one of two things: find any kind of part time work, cleaning work, start your own business, etc. and just put every penny you can to mowing down that debt.

Option TWO is less than ideal from several vantages, and may mean you cannot continue at this particular school, but may one day clear you for another school. You could immediately go to a bonafide credit counsellor or bankruptcy lawyer, each of which will cost money, I’m afraid, and either have someone negotiate a lesser payment on your behalf or file bankruptcy. While you CANNOT put federal student loans into bankruptcy proceedings, it is entirely possible that a debt to a school may be treated differently, as presumably it is not governed by the same legislation.

I could be dead wrong, and the “no bankruptcy” phenom may apply to institutional debts as well…but you’d be best getting that kind of information from a ombudsman if it’s a public school or a bankruptcy lawyer if not. They’ve kind of backed you into a corner in not giving you reasonable repayment options, I’m afraid. Either way, your credit rating will be affected with any action short of immediate repayment.

I am sorry to paint a bleak picture of options for you, but at least hopefully the Pay as you Earn program will give you an avenue to lighten some of this burden without negative impact or ballooning interest so that you can work toward some kind of clean start.

Best wishes to you.

kmcmom13 · December 12, 2013, 6:36pm

PS Here’s more info on pay as you earn:

[Pay</a> As You Earn Plan | Federal Student Aid](<a href=“http://studentaid.ed.gov/repay-loans/understand/plans/pay-as-you-earn]Pay”>http://studentaid.ed.gov/repay-loans/understand/plans/pay-as-you-earn)

scarlethands · December 12, 2013, 6:39pm

@kmcmom13 The information on the Pay as You Earn option is VERY helpful. I’ve seen it before but wasn’t sure if that meant I had have a decent paying job to apply for it. I will Definitely look into that, thank you!

What happens after collections, and when will I be able to re-attend?

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