Best Practices for Student Loans in Collection

Having a student loan go into default sucks – I know because I ignored my loans until they went into default some years back. If you’re one of the over 248,000 people who went into default on a Federal Direct Loan this fiscal quarter, you know that it sucks, too. There IS a way out, though and much like I’m about to make my last student loan payment this October, you CAN remediate and pay off a student loan — even a defaulted one.

This post gives some best practices for how to make the first call to handle it if your student loan is in default or collections.

The National Student Loan Data System (NSLDS) reports on loans, as does the Federal Student Aid Department of the US Department of Education, sharing numbers citing default by loan type, school and loan grant year — making getting overall default numbers unclear.

Graduates from 2013 have an 11% default rate, and at the end of June 2017, $5.01 Billion dollars, owed by 248.1 Thousand borrowers went into default for the first time on Federal Direct loans.

CNBC estimates that “more than 4.2 million borrowers were in default as of the end of 2016, up from 3.6 million in 2015. ” So if you’re part of the one in ten loan borrowers who need to call back or answer a collection call about your defaulted student loan, this is for you.

Here’s a short list of best practices when you need to answer to collection calls about your student loan debt.

1. Feelings: Most important, remember that the first call you answer or call back to is the scariest.

It really truly gets easier after you break the ice the first time. Yes it is not fun. It is MORE fun than ongoing worry about your loans, though.

Look, here’s the worst: if you ignore your loans you may face wage garnishment, tax return garnishment and social security garnishment and have an ongoing mark on your credit making other loans more expensive or unachieveable.

That’s bad – but that’s it. That’s the facts.

And guess what? Owing money doesn’t mean a damn thing about your personality, character, intelligence or skills. It pretty much just means you owe money and haven’t dealt with it yet.
The way — the ONLY way — to change that is to start to deal with it.

So journal, rage, cry, bitch, regret, do what you gotta do to give your feelings about your loan some much-deserved space. While you’re at it, please make a plan to also address these loans.


2. Facts: You’ll want to get a piece of paper or a google doc or something ready to both collect info on the call and list out the outcomes you want from the call.

The usual main goal, if you haven’t paid your Federal loans in over 270 days, is to find out the loan status, current totals, and potentially see what it would take to get a rehabilitation loan plan that you can stick to going. Note that you can only rehabilitate a loan once, so you need to create a plan you can manage before you agree to a rehabilitation loan. The good news is that the Feds have restrictions on the percentage of your income that can go to student loan debt, so

With student loans, like other debt, you do want to ensure the loan claim is valid – that is, that you in specific owe on the specific loan(s) in question.

Unlike with other debt, student loans can’t discharge in bankruptcy so there really is NO value in waiting it out; the fees and interest will only rise on you the longer you wait. I’m not saying this is right (I think it’s really messed up of our country to “help” this way actually) but it is what’s happening, and it means you are in charge of how much it balloons by making a move soon to address it.

Example things you’ll want to track as you go:

  • The full name and employee ID, spelled out of the person you are speaking to.
  • Date and time of the call.
  • A direct number, email address, or mailing address to this person for communicating back.
  • Options or outcomes the person you’re speaking with describes
  • How to take next steps and what those next steps are (pro tip: get it in writing.)

Example outcomes and things you’ll want to find out:

  • The case number, debt number, or any other tracking you can get on this debt.
  • What is the total amount of the debt that is allegedly owed?
  • What is the interest rate on this alleged debt?
  • What is the name of the person who allegedly owes this debt?
  • Who currently owns this alleged debt?
  • How will the debt collector prove the debt is valid? In what format (writing? orally?) and timeframe?
  • If you’re talking about student loans: what is the path to a rehabilitation loan for this alleged debt?


3. Face it: make the call.

Having done this part before, I know exactly how scary the first call to a student loan is — but therefore I can tell you how crucial it is to break the ice, do it, and start the ball rolling.

You don’t have to solve the whole situation on the first call! You can just get information and then decide what to do with it.

You can anticipate that the person who answers the phone will be somewhat pushy and have an agenda. Remember that you are welcome to also be pushy and have an agenda.

There are things you want to find out and accomplish related to an alleged debt in your name or the name of a person who has given you permission to explore alleged debt on their behalf.

Example questions to ask:

  • “What is the name of the person I’m speaking to? Can you spell that out for me please? And what company do you represent?”
    *The full name of the person and company, spelled out matters. If they will not give you a name, ask to speak to a manager and don’t release any info until you know who you are speaking to.
  • “I need to validate this debt before we can continue. Can you tell me or send me paperwork that outlines the total amount of this alleged debt including principal, interest rates, and fees; who currently owns it; and who is named as owing this debt?”
    *you DON’T HAVE TO ADMIT OR CONFIRM YOU OR ANYONE ELSE OWES ANYTHING. YOU DO WANT TO SAY YOU’RE GATHERING INFO to validate the debt. You will have to give a mailing address to receive this info in writing.
  • “I would like to only communicate in writing about this debt. What is your mailing address for me to use to send this request via certified mail?”
    *You should not have to give a mailing address to receive this info. This is a federal requirement for them to provide this, by the way.
  • “If this debt is valid, what would the next steps be to rehabilitate or address this situation? How would those steps be taken?”
    *You’ll really want to take notes on this one.

You might find in the call that it’s easier or more efficient – if you’re certain the debt being referred to is valid – to move directly into making a rehabilitation plan.

That’s what I did with my defaulted student loan and it took the stress away to have a plan in place.

4. Fight the Urge to Fold

  • Sharing information should be done sparingly with a loan provider UNTIL you’re certain the debt is validated as your responsibility and you are ready to have them have your contact info. In order to remediate you will have to share your contact info, and at that point it’s fine to do so.
  • Consolidating a federal loan or loans into a private loan with a lower interest rate is not always a good idea; think carefully before you do this. If you’re going to definitely pay off the loan, then it may well save you money. But, you’ll lose access to Federal programs like IBR and Loan Forgiveness, which may be crucial for those with higher-volume loans.
  • Still putting it off? Student loan debt doesn’t go away, and the sooner you start the ball rolling, the sooner you will have a plan in place. You might not LIKE the plan, but believe me it is less stressful than a lifetime of wondering when the calls, wage garnishments or – god forbid – social security garnishments – might start.

5. Hacks

  • You can always hang up and call back and talk with someone else or just end the call. It’s not always the most strategic, but it’s worth knowing that once you have the information you need, you can be done (for now).
  • You can permission someone to call on your behalf; you’ll need to be on the phone the first time to add their name and contact info. Note that their contact info is then on record as someone who can be contacted about the loan, and they may begin to get collection calls.
  • Don’t want to give your number? Don’t — request to communicate in writing only and call from a library, random office, google phone, etc.

Resources on Student loan debt: