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What Can I Do to Reduce or Eliminate Student Loan Collection Fees? – Debbie

Written by Consumer

I have student loans that went into default and which I have been working to get current. Now they’re charging me over $8,000 in collection fees. This is inflating my loan to over $41K.

What recourse do I have to reduce these fees or eliminate them?


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  • I’m a chiropractor… so is my wife. We got out of chiro college in 2007 & 2008. Fast forward through a bad boss… who then sold us a bill of goods on one of his offices. We luckily didn’t go bankrupt and then finished out the two years on our horrible lease. After losing a couple years on the bad deal, Iowa Student Loan started on the attack… calling us several times a day. Problem was we then had to shut down the office we bought and start over in our hometown. A couple months into our new office, things were really starting to get better. Iowa Student Loan was again calling over and over and said I was out of deferment time. But even though we started turning a profit, we were still far from being able to pay the $1,000 a month they wanted on my $180,000 balance (yeah, you read that right… 180 K). I then was told I could apply for a hardship deferment… which of course I thought I was going to get since our last yearly return at the previous office had us making a grand total of $24,000 COMBINED. A month after I applied I was told I was DENIED… which I couldn’t believe. They wanted me to pay $1,000 a month… when we were bringing in a total of $2,000. They told me I missed the cut-off by about $1,000 for the year… and I made too much. I also found it puzzling that they didn’t care about my wife also owing about the same amount… as they don’t “take it into consideration”. How do you NOT take into consideration that BOTH OF US have student loan debt of about $180,000.

    Anyway… there was nothing I could do to make the payment yet, so I did the only thing I could do… ignore them, no matter how many times they phoned me and my family. About a year into our new business, we had a couple very good months financially at the office and I decided it was time to start paying my loan (because for once I could actually afford it). I wasn’t sure I would be able to sustain the $1,000 a month payment, but I felt more hopeful it was possible.

    As I was looking for the number to call Iowa Student Loan I found an unopened piece of mail from them stating as of November 2011 that my federal loans have defaulted. It then showed my balance changed from $180,000 to $221,000 over night. Yeah… the collection agency (actually I was told the Iowa Student Aids Commission was responsible) charged me $41,000 or a one-time fee of 23%… the woman on the phone actually said… “It’s only a one-time fee”… like it’s no big freaking deal.

    I sorry… but number one… why didn’t I qualify for hardship with a family of three making only $24,000?

    Number two… why did my wife qualify this year for the same hardship deferment when we made nearly twice as much together… $45,000???

    Number three… why are they allowed to charge so much… especially in this stinking economy? I thought collection fees were fees that represented the cost the collection company had to pay out to get the money collected. I get they need to make money, but to gouge people just because they don’t have money… it’s insane.

    Think about this… if you’re going to pay back a $41,000 penalty… how long will it take to pay it back approximately? With interest, (without doing the math)… I’m guessing it would take me about $400 a month for 10 years to pay it back.

    Right now I’m paying $1,302 a month to pay my loans back. In two months my wife’s loans are going to be due… and we can’t afford it (not another $1,300). What can we do from here now?

    Do I have any recourse in opening an investigation to find out how she qualified for a hardship deferment and I didn’t even though we made about twice as much when she applied?

    Somebody pinch me… I must be having a nightmare…

  • I’m in the same boat- please keep up updated. If it’s any help in Texas law does not allow granishment- but dont know where you live

  • Contact them with your proof, tell them its excessive & that you will either go to a different creditor (easily found online), or that you may not be able to pay.
    Put them on the defensive and hopefully they’ll work with you.

  • Actually..they are pretty much non negotiable. I highly suggest reading The Student Loan Scam by Michael Alan Collinge. It will break your heart, but will keep you from  ever becoming a statistic again. Once the fees are there, they follow you to the grave. Pay them. Or you will be garnished. Self employed? You social security will be garnished. It never goes away.Sorry.

  • Debbie,

    Collection fees are (technically) negotiable. If these are federal loans and you bring them back into good standing there is a good chance that the servicer will consider adjusting the fees after you have made regular payments for some time. If these are private loans you may have to deal with the collection agency and they may not be quite so agreeable.

    The federal government has a dispute process and an ombudsman to help. Go to for more information. Basically though, it is legal to charge collection fees and your only real recourse is to ask nicely to have them reduced.

    Good Luck!

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