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How Do I Rehabilitate my Wells Fargo Student Loan ACS Education is Servicing?

By on December 8, 2014

“Dear Steve,

I am currently having my wages garnished for a defaulted student loan and am trying to find information on rehabilitation. I am fairly certain that since my financial situation has significantly improved I would be able to successfully make the additional payment required for the first 9 months of rehabilitation to remove my loan status out of default. I am managing financially with the garnishment but my credit score has taken a deep hit and I have to move with my family next year so I worry that a finding a new job and housing will be difficult with an active garnishment and low credit score.

Who do I contact about figuring out whether or not I can rehabilitate my loan? The original loans were through Wells Fargo Education Financial Services but ACS Education Services was the collection agency when my account went into garnishment. I can’t find information at either place about it and everything I’ve read talks about the process but not where to put it into motion. Your help is greatly appreciated.

Heather”

Dear Heather,

I think I’ve solved your issue. You see, rehabilitation is a tool used for federal student loans and it seems you have a private student loan. Those are a modern kind of special hell.

My advice to anyone considering taking out a private student loan is don’t do it. They are a trap. But a trap many schools will gladly and cheerfully push students into so they can get paid for putting butts in seats.

Private student loan lenders have no obligation or requirement to offer any sort of meaningful solution to help with a financial hardship. As proof of that all you need to do is look at the very advice Wells Fargo gives on dealing with a financial hardship.

Here is what they say.

“We may have options that will provide temporary and permanent relief, such as:

  • Short-term payment relief for up to two months as long as you’ve consistently made your loan payments on time
  • Payment relief for up to six months due to financial hardship
  • Payment options if you are already past due on your account
  • Loan Modification Program which may temporarily or permanently lower payment amounts
READ  I've Had All Sorts of Issues With ACS Over My Student Loan Payments and I'm Now in Default - Alison

Please call us at 1-866-878-1083. We’ll discuss these repayment options with you.”

As you can see, those “may” offer you some temporary relief.

But it sounds like you were delinquent on your private student loan, possibly sued, had a wage garnishment authorized, and here we are today.

At this point your options are to suck it up and deal with the garnishment or find some student loan consultant or lawyer who actually knows what they are doing when it comes to negotiating these things. In fact here is a recent article from a California attorney who says why this is not the end of the world for many if they act early.

At this point since they are already garnishing your wages I’m not sure what the leverage would be to persuade them to be lenient would be unless you can settle the balance of the debt in one or two really large payments. Private student loan lenders will settle debts, even those with a garnishment for around 60% of the balance.

But if you are a really lucky person then maybe the loans are dischargeable in bankruptcy. See this article for information you will not believe. Private student loans that were used for accredited schools or for expenses other than the cost of attending school, can be eliminated in bankruptcy. That’s a fact, Jack!

So, that is all a longwinded way of saying the reason you can’t find any rehabilitation information for a defaulted Wells Fargo private student loan is because it does not exist.

Even for a federal student loan, once you are sued by the USA the Department of Justice won’t let you go into a rehab.

The lesson to be learned is if you start to have problems managing your student loan payments, read this and act early to develop a plan that has a chance of success.

READ  ACS Education Services - CFPB Complaint

And by the way, it’s stupid easy to rebuild good credit, read this.

Please post your responses and follow-up messages to me on this in the comments section below.

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About 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.

10 Comments

  1. Steve Rhode

    December 9, 2014 at 1:23 pm

    I completely agree in the power of bankruptcy and for many people a Chapter 13 makes perfect sense. And by all means she should talk to a bankruptcy attorney about this situation. But here is why I did not suggest it in the answer. She said she is able to manage financially with the garnishment and she will be getting a pay increase. A Chapter 13 might slow or stop the garnishment but when the 13 ends the debt begins again. So why would she not just be better in dealing with the garnishment now rather than pushing it into the future? Besides, a Chapter 13 isn’t going to rehabilitate them for her. Did I miss something in that answer logic?

    • Matt Alden

      December 9, 2014 at 1:34 pm

      I think the logic was sound. I would only point out that if she has significant student loan debt, the money saved by a Chapter 13 in terms of not having to pay interest can often be significant, especially if she has other unsecured debt. Every dollar paid in a 13 goes directly to the principal. So even if it the debt isn’t paid off, she might come out ahead finanically in terms of the interest avoided and the reduction in principal. Also, the other beauty of a 13 is it forces your creditors to take what you can afford it they are willing to do so otherwise. Just my thoughts. On a 30,000 student loan over 5 years at 6.8%, you could save $5,472.55 in interest alone, get the garnishment stopped and help your credit score.

      • Joe

        January 13, 2015 at 4:42 am

        It is my understanding that interest will still continue to accrue on a student loan even in a chapter 13. It would certainly be great news if that were not true and people could get an interest break during that time. Matt, can you point to a reference that would indicate that interest does not continue to accrue on a private student loan inside a chapter 13?

        Thanks

        • Matt Alden

          January 13, 2015 at 11:15 am

          Hi Joe,

          The bankruptcy code is written such that unless there’s
          specific language in the code allowing for student loans to receive interest payments in a Chapter 13(and there’s not), they can’t charge interest while the Chapter 13 plan payments are being made.

          This also follows from the bankruptcy code’s requirement
          that all unsecured creditors get treated equally. They each only get a pro-rata share of a Chapter 13 debtor’s monthly disposable income. Student loans are unsecured debts.
          If they were allowed to charge interest during a Chapter 13 case, they would receive more than other unsecured creditors like credit card companies, utility providers, and medical providers.

          Hope this helps.

          Sincerely,

          Matt Alden

          • Steve Rhode

            January 13, 2015 at 11:26 am

            So just to be clear for Joe, are you saying no interest will accrue on the unpaid balance while in a Chapter 13 and be added on to the loan when the Chapter 13 is dismissed?

  2. Dorothy Bunce

    December 9, 2014 at 1:18 pm

    A Chapter 13 Plan can stop the wage garnishment and allow repayment of the loan at 0% interest during a 5 year period. Of course, this advantage must be offset against the cost of the Trustee commission and legal fees. For someone trying to survive, the Chapter 13 may be the only realistic option and does not require approval by the lenders.

    • Steve Rhode

      December 9, 2014 at 1:33 pm

      Thank you for taking the time to comment.

  3. Matt Alden

    December 9, 2014 at 1:07 pm

    A court-supervised repayment plan may also give her some real benefits. It stops the garnishment, allows her to pay what she can afford, and stops her creditors from being able to charge interest on any unsecured debt she has, including her student loans. She should call a Chapter 13 bankruptcy attorney in her area for a consultation.

    • Steve Rhode

      December 9, 2014 at 1:33 pm

      Matt, thank you for commenting to help.

      • Matt Alden

        December 9, 2014 at 1:41 pm

        My pleasure. I appreciate the chance to join the conversation. You provide a real help to people by your work in this area.

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