Why Are Huge Collection Costs Being Added to My Student Loan?


Dear Steve,

I was unemployed for several months and my student loan with ACS was delinquent and now ASA American Student Assistance has “purchased” the debt and say I can do the rehabilitation program but they are going to add 18% to the total.

Also, the letter I received from ASA said that I had until 2/8/16 to contact them and this would prevent the loan from going into default.

Upon contacting them, I was told it went into default Dec. 6, 2015 and I would be charged the 18%. How can they do this when the letter clearly states deadline of 2/8/16? Please reply as soon as you can, I don’t know what to do!



Dear Selina,

If your loans were more than 270 past due then at that point they went into default.

I am assuming these are federal student loans since you mentioned the rehabilitation program. More details on rehabilitation can be found here.

I would urge you to logon to the National Student Loan Data System to learn more about the actual status of your federal student loans.

Rehabilitating your student loans offers you some real benefits. It stops any potential wage garnishments and suits. It brings your loans back into a current status and gets things back in order. It can also avoid collection costs if you act quickly.

According to the Department of Education, you may not have to pay the collection costs up to 16% if you act quickly in rehabilitating the loan. Here is what the Department of Education says about collection costs after the 270 day default, “Department regulations bar a guaranty agency from charging collection costs to a defaulted borrower who responds within 60 days to the initial notice provided by the guaranty agency, enters into a repayment agreement, including a rehabilitation agreement, and who honors that agreement. This includes, in the case of loan rehabilitation, both collection costs on the initial and subsequent qualifying payments and collection costs upon the ultimate sale or assignment of the loan. For defaulters who do not enter into a repayment agreement, guaranty agencies can and should charge collection costs.”

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But it sounds like the February 8 date was the last day you had to avoid the collection costs since your loans actually went into default on December 6th.

All I can do is infer what happened based on the information you gave me. But that’s my best guess.

I know dealing with your student loans can be a confusing mess. But there are some good options for preventing loans from going into default, including zero dollar monthly repayment plans. For anyone reading this who might be in the same situation, please read “The Ultimate Guide to Dealing With Student Loans You Can’t Afford.”


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

Damon Day - Pro Debt Coach

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