Ask The Get Out of Debt Experts

A Huge Collection Fee Was Added to My Student Loan Even Though I Objected

Written by Steve Rhode

Question:

Dear Steve,

1) On 08/03/15 Navient sent a letter to a po box of my brother, that was the address on file for me – stating on “Final Notice We hereby demand full payment of your loan(s) send payment today to avoid serious legal consequences. (At this time I was living out of the country and never got the letter myself – even though it supposedly arrived at that po box address). 1) On January 0x, 2016 Account No. xxxxxxxxxx listed a Default Purchase Date: January 0x, 2016 …. You have until March 0x, 2016 (60 days from the date of this letter) to enter into a satisfactory repayment agreement or to pay your balance in full; otherwise, collection charges will be assessed up to 24.34% or your outstanding principal and interest balance, pursuant to federal regulation 34 CFR 682.40(b)(2) …..

KEY ISSUE HERE IS THIS LETTER WAS SENT TO AN INCORRECT ADDRESS THAT ADDED A “1” IN FRONT OF THE RIGHT NUMBER FOR THE ADDRESS…… IT LISTED THE ADDRESS NUMBER WITH AN ADDITIONAL 1 AT THE BEGGINING (WRONG ADDRESS)…. (I NEVER RECEIVED THIS PHYSICAL LETTER).

ON EARLY SEPT. I CALLED ACCOUNT CONTROL TECHNOLOGY AND ASKED THEM NOT TO RECORD ME AND ASKED THEM TO START A REHAB PROGRAM WHICH THEY CALCULATED ON $x / MONTH FOR 10 MONTHS, BUT WHEN THEY SENT ME THE FORM TO SIGN – IT READ THAT I OWED 18,000 ON COLLECTIONS WHICH I DISAGREED ON AND DIDNT SIGN THE FORM. I CONTENDED TO THEM THAT I DID NOT RECEIVE THE 60 DAY NOTICE TO COME TO AN AGREEMENT ON REPAYMENT WITHOUT COLLECTION FEES ASSESED.

I DIDNT SIGN THE REHAB AGREEMENT AND PROCEEDED TO SEND EMAIL TO OBDUSMAN COMPLAINING I NEVER RECEIVED LETTER WITH 60 DAYS TO ENTER INTO SATISFACTORY REPAYMENT AGREEMENT – AND IN TURN NAVIENT RESPONDED SENDING ME THE 2 COPIES OF THE 2 LETTERS THEY HAVE SUPPOSEDLY PREVIOUSLY SENT TO ME AND NOW I SEE THE SECOND ONE HAD THE WRONG ADDRESS TYPED.

IS THERE A POSSIBLE LEGAL DISPUTE TO BRING OUT MY LOAN FROM DEFAULT AND TAKE OUT COLLECTION FEES – GIVEN THE SECOND LETTER WAS SENT TO AN INCORRECT ADDRESS ?

I RECENTLY ALMOST HAD MY HOUSE TAKEN AWAY, AS I HAD NO JOB FOR A COUPLE OF MONTHS – AND CANT AFFORD TO INCUR $18k IN COLLECTIONS IF I DONT HAVE TO.

PLEASE ADVISE KINDLY BEST ROUTE TO TAKE AND IF AN ATTORNEY IS REQUIRED TO PROCESS A LETTER REPLYING TO NAVIENT ?

RealPerson

Answer:

Dear RealPerson,

I understand your frustration but I’m not sure it has any bearing on the fact the loan went into default and the collection fee was added on. That is something that is typically spelled out in the original loan document or master promissory note as a consequence of defaulting. It’s not a new term to the loan.

It is the responsibility of the borrower to either check on their account with the creditor on a regular basis to make sure their loan does not have any errors or to maintain an up to date mailing address to get notices. It sounds like it might have been possible you had not updated your mailing address to get timely notices.

I can’t think of a reason that would prevent the charging of the collection fee since that is automatically added once the loan goes into default, usually 270+ days past due.

If you entered into a rehab program either before default or within 60 days of default there is a process to have those collection fees waived. But you could have also consolidated the loans into a new Direct Loan with an income driven repayment plan and avoided rehab and the collection fee. Again, it would have had to have been timely.

According to the Department of Education, collection costs on Federal Family Education Loan Program (FFELP) Loans may not be charged if the borrower “promptly after default enters into a repayment agreement, in particular a rehabilitation agreement, with that agency, and who honors that agreement.” The guidance goes on to say, “A guaranty agency, after it pays a default claim and acquires the loan from the lender, is required to send an initial notice to the borrower. In that notice, the guaranty agency must give the borrower at least 60 days to take any of several actions, including entering into a repayment agreement with the guaranty agency. In this letter we refer to this step as the “notice and opportunity to resolve” the debt. A guaranty agency cannot charge collection costs to a defaulted borrower who, within the 60-day period following the initial notice, enters into a repayment agreement, including a rehabilitation agreement, and who honors that agreement.” – Source

So it is also dependent on the type of loan you have. These rules only apply to FFELP loans.

I am a bit confused on the address error. You said your brother did receive the notice but you also said the address was incorrect. Apparently you say the first letter had the correct address on it.

You can always raise a legal dispute about any issue. That doesn’t mean the result will be in your favor. You might want to hire a local attorney to represent you. You did not say what the response was from the Ombudsman office was. I’d love to know what they said.

Finally, you can always file a complaint with the Consumer Financial Protection Bureau and see if that gets any additional attention or response.

Please keep your address up to date with the loan servicer in the future to avoid surprises.

morehelp1
Choice1 Choice2 Choice3 Big Hug!
Get Out of Debt Guy - Twitter , G+ , Facebook
If you have a credit or debt question you'd like to ask just use the online form .




About the author

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.

Share a Comment / Leave a Reply

Scroll to Top
%d bloggers like this: