Hi
Robert,
I
understand how everything feels, been there myself. My advice, know your options.
Here
is a summary of my thoughts, please read the paragraphs for a better
understanding:
1)
Request the credit agencies
to stop calling, and only correspond by mail.
2)
Know your student loan
options. They will help you.
3)
Return to the bank, and try
and renegotiate a payment plan. Some
banks will, some won’t.
4)
ANY amount of payment, ie: $20/month,
shows good faith, and has “less” damage to your credit.
5)
Take control of your
finances, and yes, the credit agency has an interest.
6)
Make an offer to the bank
for 66% the value of the loan … if you can.
7)
Although immoral and
unethical, default on your loan. It is not
illegal.
8)
Declare bankruptcy (only
after 7 years following graduation) … your credit is affected anyway, might as
well get rid of it.
9)
Be active in your
decision. Indecision and procrastination
are slowing your down for life.
10) Be honest with yourself.
First, minimize unwanted stress:
Collection
agencies have a right to call you, BUT, you have a right to request that they
stop calling; so, the next time they call, request confirmation of your student
loan number, the amount, their address, and the correspondent’s name ... then,
send a letter to them demanding that they stop calling, and everything from now
on, done by mail. Send it by registered
mail and get a signature. After that, they
MUST correspond by mail or your case for harassment just got stronger; be stern
on this: let them know that you are taking control, not them.
If you’re
mother has co-signed (please get that 100% checked), then, ARC will target her
as well. Any repetitive unwanted calls, is grounds for harassment, for your or
your mother (some credit agencies go so far as calling your workplace). They're going to hate you for it, but it is
your right. There is a psychological
play here, and they do try to wear you down; it does work on people who don’t
know what they are doing. Take control
of your finances first, then, take control of your repayment.
If
necessary, put a block on their phone number, and others who may follow.
Second, know your student loan options:
Many
students, and people for that matter, often, let things go without knowing
their rights; and often, as a result, are too embarrassed to talk to anybody
about their problem and would rather just let them go, and just plainly “think”
that everything will be alright. The CSL
has options:
1)
Interest relief
2)
Debt Reduction in Repayment
3)
Revision of Terms
4)
Permanent Disability
Benefit
Know
what they are and how they can help you.
Request information and act accordingly.
http://en.wikipedia.org/wiki/Student_loans_in_Canada
Third, try and renegotiate with the bank:
Send a
letter to the bank, or better yet, schedule a meeting, and show them you’re working
and are willing to repay your loans, although, at a different monthly rate,
based on your income. Be honest and
sincere. If you can pay only a certain
amount, they will work around your budget.
If they feel that you are being “shady”, then there is no reason to
waste their time; you already defaulted once, and chances are, you will do it
again.
Fourth, pay something each month (even if it
is only $20):
ANYTHING
by law shows good intent ... if you can only afford $20, $50, $100 per month,
then arrange it. The bank might say, "This loan is no longer our
responsibility, you need to deal with the credit agency." Persist.
Some banks will re-enter negotiations, some won’t. It depends on whether you had a great
relationship with them. Personally, I
would much rather deal with the bank, than the credit agency.
Regardless
of whether the bank has your loan or not, pay something each month. This shows good intention, good faith, even
if it is ARC. In a court of law, it
shows that even during financial hardship, you are taking responsibility of
your loan. You might not have a lot of
money left over at the end of the month, but you are paying something towards
your loan. After 6 months or so, apply
for interest/debt relief. They can only
say no. But, once again, show good intent
with your loan and pay regularly.
Understand, you defaulted … at this point in the game, there’s no reason
to give you anything.
Fifth, know that the credit agency has an
interest in your loan, and they will say anything:
Collection
agencies usually collect 30% of the loan amount in fees. So, if you had 21k, then,
their interest is 7k and the bank has already foregone this amount. The bank also has insurance for defaults and
will write off a percentage of the loan in the year of the default. So, on
defaulted loans, they write off your loan, receive the insurance money for some
of the amount, transfer the loan to a credit agency who will harass the hell
out of you, then, will accept another 66% of any money you give the credit
agency from there. In summary, although banks and companies say that they don't
want you to default, in the end, they do, because, it means more money for
everybody. So, that is why the
government and other agencies keep giving out more money to students, it makes
money, either in interest or in defaults, then when you start working, more
taxes.
Sixth, make an offer to the bank to buy out
the loan for 2/3:
I have
had friends, including myself, who have offered 66% to the bank directly, and
they accepted; i.e. offering $14k to your bank to buy out the loan. You can only do this if you have the money that
would save you capital and interest, and avoid the credit agencies; only if you’re
in a position to do it, or have somebody who can help you this way. Understand, ARC is acting in their interest,
at the REQUEST of the bank. At this
point in the game, the bank only wants their 2/3 … so, if you can give them
their 2/3, they have the right to withdraw their request to the credit agency.
Seventh, default on your loan:
Although
immoral and unethical, not illegal, and something I’ve learned in the last
decade, money and law rule, morals and ethics, although culturally necessary,
are less relevant. Right now, you’ve got
a huge strike against you for defaulting in the first place. So, there is absolutely no reason why the
bank has any interest should you desire interest/debt relief. The bank is there to make money, not waste
their time giving interest or debt relief, especially after you have defaulted
in the first place. To them, they have
already forgotten about it, already written it off, already collected
insurance, and already sent for collection … they have already done more with the
loan, than they intended. Everything to
them from this point on is bonus. If
you, in all honesty cannot now, or cannot in the immediate 5-6 years, be in a
position to make regular payments, then default. Your credit is already affected, and after
2-6 years, the loan enters a statute of limitations whereby, the loan can’t be
collected anyway. Although it will
remain on your credit report, if you are earning a living by then, although
some creditors will be timid, your years and maturity may override the credit
history. Remember, if somebody has the
opportunity to earn money from your actions, they will enter your game.
Eighth, have you considered bankruptcy?
Bankrupt
student loans are acceptable after 7 years (it used to be 10). If you are going bankrupt within 7 years of
graduation, then you will still be responsible for the loan. Since your credit is affected, it doesn’t
really matter what you do now, people and creditors will hesitate in doing
anything with you, especially if you’re not even making enough to pay the
loans. If you are earning a great
living, then regardless of whether you defaulted on a loan, many will give you
credit after just 1 year. Start your
life over.
Ninth, don’t hesitate, do something:
Make a
decision, take action, and get this off your back. The stress, pressure, the constant worry, the
monthly reminder, only slows you down from moving forward. Although you might think that your student loan
is a burden, it is nothing compared to you delaying or slowing down your life. Either know you are defaulting, know you
reimbursing, know you are bankrupt, know you are buying out … this will give
you certainty and direction.
Ten, be honest with yourself:
What
are your true intentions? Do you want to
pay back the loan, or not? If so, then
do what is necessary to pay it back, if not, then default or declare bankruptcy
already, forget about it and move forward.
Scotiabank Federal Loan sent to collection
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