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Should My Daughter Work With the IRS or CCCS on Her Student Loan Debt?

“Dear Steve,

Need to see if you can help with this question.

My 21yr old daughter just found out via having her income tax refund offset due to past due obligation, that she has an outstanding school loan from 2006. Apparently when she was 18, her stepmother had her sign loan documents along with her enrollment documents to a trade beauty school. My daughter thought she was simply filling out enrollment docs and had no idea she was signing a loan document.

She moved out of their home that same year – the address on the loan was obviously still her father’s and stepmothers house – so when the loan was not paid all correspondence to the beauty school and the default credit company were going to their address and not to my daughter – and not forwarded to my daughter. Otherwise she would have known she was in default and had a $5,800 loan outstanding.

Can you advise if we should have her work directly with the IRS financial management service or possibly go thru CCCS. The financial management company wants her employment info – can they also go after her paycheck. Also once she starts on a payment plan to whomever, will the refund offsets still be in play until the debt is gone or is there a way we can have the offset taken off.

Thanks for your help – Camille”

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The Answer

Dear Camille,

It sure sounds like your daughter learned a hard lesson about being an adult. No matter how she feels she was mislead by her stepmother, I think it’s clear she owes the money now. Hopefully she graduated and got the benefit of the loan.

Since no action was taken on the loan she is now having her tax refund kept as part of the Internal Revenue Service Refund Intercept Program.

The best course of action would be for her to contact the Department of Education collection department directly and inquire about her option to rehabilitate the loan. There is no need to contact CCCS on this matter.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

Should My Daughter Work With the IRS or CCCS on Her Student Loan Debt?
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Camille Austin

    Steve

    Another great update – we contacted the payback department – explained my daughter wasn’t working full-time but we wanted to get on a payback schedule – she couldn’t meet the Rehabilitation program minimums but would like to begin making $50/mo payments. She sought approval to get her started on the rehab program anyway (with all of the benefits) if we could agree to a monthly payment of $75 – so she didn’t have to put down the 10% down w/$100/mo payments – further proof that they are willing to work within the individuals means. So anyone who’s defaulted on an educational loan, has absolutely no reason not to make arrangements to pay their debt back – I have my own education loan to pay off and benefitted tremendously from mine so accept under dire circumstances, everyone should be able to take care of their responsibility – which after reading one of your downloads – that’s the #1 item – take responsibility and you’ll feel much better for it. Thanks Camille

    • http://GetOutOfDebt.org Steve Rhode

      Camille,

      Awesome update.

      Thanks.

      Steve

  • CAMILLE

    Steve:
    Here’s the update regarding my daughter’s Education Loan – it had been already transferred from the Dept of Education to an educational collection agency – BUT I must say, these people are willing to help you do whatever it takes to get the loans paid. They will allow the loan to be rehabilitated – this is the info they provided on a $5,800 loan – you have to pay 10% down and then make $100 monthly payments – after approximately 12 payments – the defaulted loan is taken off of your credit report (which we found out was obviously on hers) and tax refunds are no longer offset. As long as you keep making your payments they will stop garnishing the IRS refunds and keep off your credit report. If you default on payback arrangement then it automatically gets put back on the credit report and also IRS is notified. Since my daughter can’t make this large of a commitment right now – they are willing to take whatever it is she can pay and simply say that to try and get to their minimums as soon as she can, in order to get the benefits of the Rehabilitation Program. The customer service rep was very friendly – which is not normal for a collection agency but again they are willing to help you get this debt taken care of. I’ve been reading your free book that I downloaded offline and I must say – even though for a 21yr old, I know her situation to her seems dire – but just finished your Chapter 3 “horror stories” and I must say it could be worst. There are so many people in this predicament and your dedication to help these people is an awesome thing. I’ve given this website to my daughter to help her in learning how to handle money better. Thanks again for your help

    • http://GetOutOfDebt.org Steve Rhode

      Thanks for the update. It’s so good to hear things are moving coward in a positive way.

      Steve

  • Camille

    Steve:
    Thank you so much for your wisdom and advice – I’m sorry to say that due to the circumstances in my daughter’s life at the time, she did not finish that trade school and yes, she has learned a huge life lesson and I can only pray that she’s learned it at a very early age and will not have to keep re-learning. I’m stressing to her that your Credit rating is EVERYTHING. She is determined to take care of her responsibility and it may take a while but she will prevail. I know from experience what restoring your credit feels like as I suffered the 7yrs following the divorce from her father and him not paying any of what he was responsible for – I was taught early on in life – you are “responsible” for your debts but the feeling is awesome once you’ve regained your credit – takes hard work and much determination but the payoff is huge both personally and financially. She too will learn the power behind repairing her credit. Thanks again for your kind service – I’m sure you have helped so many and I will keep you posted. Plus I forwarded your info to my daughter so she too can take advantage of your advice!!! A very concerned and gracious mother

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