Get Out of Debt Guy

I Want to Settle My Student loan

Posted March 31, 2014

WRAL Reader Question

I had a student loan default in 2010. I was in a tough situation when I signed the papers, really young and didn't have a clue what I was doing and then moved to Guam and never really thought about it until I checked my credit a couple years later.

Anyways, I have been attempting to fix my credit situation recently and last year, I noticed that at one point the original company (AES), NCO, and MRS BPO all had listed the same loan on my credit report. I attempted to contact NCO, because 1) AES said that they were no longer servicing the loan and 2) they had been running my credit like twice a week every week causing my credit score to go crazy.

When I spoke to someone at NCO, they said that MRS would have to take care of the loan. I attempted to contact them and left them messages for a week but never got a single call back. I got frustrated and decided that someone would call me if the wanted their money. No one did and now NCO is no longer listed on my account and have stopped running my credit.

This week I have attempted once again to try to settle my defaulted loan. I finally got a hold of someone at MRS and they told me that needed to get in touch with NCO. I called them again and spoke with a guy who said that my loan had been placed in hardship but he did not know why, but possibly because my co-signer is in the military.

I asked him what I could do to make a settlement and he said that he would have to send it to collections in order for me to do that. Then, he said he could give me an address to send payments to but that his office does not handle them. I do not want to send payments, I am hoping to settle because the amount that they are saying is owed is already double what it originally was. (From 4000 to 8000). I asked him to wait to send it to collections because if there is another way to deal with this without another collection being listed on my account that is how I want to do it. He said that he would wait and look into why it was placed in hardship. Someone called today, but no message and when I called back, now of course no one can find my account.

What is the next best step???

Why is MRS BPO still listed on my credit report with the same debt as AES and is there anything I can do about it?

Abbie

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Dear Abbie,

Since you vanished it is likely the lender and/or servicer went after the cosigner. That's what they do. A cosigner is 100% responsible for repaying the loan if the borrower does not.

It the cosigner is on active duty then it could explain the hardship status.

How you approach this really depends on a couple of factors. The most important is if this is a federal or private loan. I have not seen any federal loans settle except in litigation and even then only if there is an underlying reason why the borrower can't pay like disability, medical condition, or loss of income.

Private loans will settle but I've not seen anyone successfully initiate a settlement. However, when a private student loan account triggers some internal process some private student loan holders will proactively send out settlement offers in the mail. Sallie Mae is doing a lot of these offers right now.

The loan listed twice just sounds like the loan was transferred to a new servicer and the credit report was not updated. That would be easy to deal with by contacting the three credit bureaus and disputing the incorrect line item. 

If this is a federal student loan then I would suggest you consider rehabilitating this loan after July when new rules begin that will allow the loan to be brought out of default after five payments of as low as $0 per month if you qualify for an Income Based Repayment program. See this guide for more information.

Steve Rhode
WRAL Get Out of Debt Guy

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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.