What is the best way to handle repayment of student loans?

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What is the best way to handle repayment of student loans?

I have student loans that have defaulted and gone to a collection agency. I contacted them in an effort to alleviate my debt. They told me that it would be best to enter into their loan rehabilitation program. According to my credit report, I owe about $31,000 for my loans. They say I owe closer to $40,000 with their fees and interest. The issue with the interest rate is confounded by the fact that one person tells me that my 8 loans have 8 different rates ranging from .8% to 2.47%, and another telling me that all of them are 2.47% monthly. They say this program is the only way to prevent garnishment. However, paying into the program will take away approximately 25% of my income after taxes and do little to lower the amount of the money that I owe on my student loans. The program is to show that I can pay on a continuous basis so they will then be able to sell my account to another lender and then I can renegotiate my debt. Should I go through with this?

Asked on August 14, 2010 under Bankruptcy Law, Georgia

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

What you need to do is to go and see a reputable debt counseling service in your area. Ask around as many are scams and offer help that they do not give after you have paid a fee.  Tell the collection agency that you would like a complete statement of account, including the interest rates on all the outstanding loans and their balances, as well as a complete list of all payments made.  Consolidation is definitely a way to manage the loans and repay them, but it does not necessarily have to be done through them.  They are pressuring you and preying on your fear right now. Things may seem bleak but they will get better. Just get some help.  Good luck.  


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