Get Out of Debt Guy

Which Program Should I Go With to Repay My Student Loans?

Posted June 23, 2014

WRAL Reader Question

Dear Steve,

I have federal student loans added to about 24,000 they were in default now for 13 years I've been with with Asa. I have been making monthly payment on time since 2001 Asa Of 150.00 a month they suggested i consolidate and get them out of default I have been shopping around. Nelnet came first they charge a fee of about $700 to consolidate They asked for a checking account number up front and so much personal info ss of coarse 1040 work stubs I guess makes sense but they were asking for 3 payment 291 for three months then two months -165.00 Then it would be 80.00 for 10 years then all will be forgiven as with presidents forgiveness program as long as I stayed in public job I work for a nonprofit company with this said But I am 65 and asked if I retire in 5 Years what will happen they said payments will go up I have to stay 30 hrs in some kind of community work.

I found another lender american student loan consolidators in boca raton florida it seems too good to be true fee is 499 They ask for credit card License two references odd no w2 or tax info they say pay fee then no payments for two years then 79.00 a month for ten years and rest will be forgiven and the 24,000 will not go up I'm gave them so much personal info it sounds so good but I'm skeptical as why would you pay up front fees before your loans are in consolidation I'm wondering if I'm being scammed. I cancelled with nelnet as this sounded better for me especially the forgiveness part what do you think should i keep looking for other lenders . Does this one in boca raton florida sound real They have all my personal info and I'm worried.

Phyllis

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Dear Phyllis,

Thank you for contacting me. 

It sounds to be you are being pitched the Public Service Loan Forgiveness (PSLF) Program by Nelnet and an income based repayment program and PSLF by the other folks.

You said you've been both paying on time and have been in default since 2001. More information would be needed to clear up the that statement.

The Public Service Loan Forgiveness program only applies to student loan payments made after 2007 so nobody is eligible for forgiveness under that program till 2017.

If you have been making on-time and full monthly payments since 2007, those payments would already count towards the program already.

The solution being sold to you by the other company sounds like they are talking about an income based repayment (IBR) program and PSLF but it is unclear if the $79 per month is their ongoing program fee. Under the IBR program your debt would not be eligible for forgiveness for 25 years. The ten year statement sounds like they are taking again about the PSLF program but unless your payments since 2007 count and you are in active default, then you've got the same problem of getting current now but only working five more years. That doesn't see to add up.

It also appears both groups are charging you fees for a program that is available for free from the Department of Education. While you might want to pay someone to assist you with this you need to be aware it is not necessary to pay someone else if you navigate the waters yourself. 

You might want to start with my guide on dealing with student loan payments, click here.

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.