Student Debtor Questions Answered

NOTE: If you would like to ask Morgan your own question, do it on this form.

BOOK: SDWP had planned to help publish a series of very detailed books that would show student debtors how to combat debt collectors and even provide “how to” facts and details for eliminating some or all student debts legally. We have exceptional, little known information, however, there appears to be no pre-sales interest in such books in the student debtor world so nobody wants to bother writing the books (it’s assumed to be a waste of time). To show your interests in these possible student debtor assistance books, you can add your name to the “spam free” “no obligation” pre-sales list by e-mailing a book request to:  book [at] We will only contact you should any of the books become available (this sign-up is for books only and is not used for any other purposes so if you wish to sign-up for SDWP membership or other aspects, you will also need to fill out this form.

SDWP Answers Your Student Debtor Questions (By Co-Founder Morgan Fisher)

The reality is the student loan and respective lending, debt collection and higher education industries have erected one of the largest and most lucrative yet destructive systems in American history. It is a system that opposes the entire purpose and intent of Congress’s public policy with regard to starting the student loan program. What started as a well-meaning idea has morphed into a diabolical nightmare that is quite literally killing students and Americans and destroying their lives and those of many of their loved ones. It’s appalling and every educator in America should be ashamed of themselves for helping cause this to happen!

I co-founded the Student Debt War Project (SDWP) to try and help student debtors who are not represented or protected by anyone but who are, instead, a target of a predatory system and the aforementioned groups and industries. Sadly, our project has lacked sufficient employees and volunteers with organizing skills as well as sorely needed funding so it has become difficult to stay on mission. Yet we are getting blasted with thousands of inquiries each week and I desperately feel for the plights of so many while being disheartened I cannot lend them more assistance.

Some have suggested that I tour the country in speaking engagements because of my recognized expertise across the spectrum of disciplines that impact this subject matter: lending, debt collection, bankruptcy, education, student loan programs, consumer laws, and more—everyone these days is a specialist but if you want to understand this complicated subject matter, you need to be a multi-specialist—which makes me a rare breed. Therefore, with such learning also comes an implied human duty to teach others so I will try to answer some of your questions and give you some direction or new approaches to consider.

My first piece of advice is that all student debtors need to keep their spirits high and strong and when things seem overwhelming, get mean and go on the offensive—fight back! You may not win but fighting back will make you feel empowered—and eventually you will learn how to win. If I can do it, it means most anyone can do it too! Therefore, your first job on the path to freedom is to keep hope alive and have faith that you will eventually succeed so long as you persevere and never give up—you can escape the federal government debt slavery system if you work on it earnestly. I did, as have many others, and together will try to help you do it too.

Now smile because you finally found the right place to learn some powerful tactics and tricks and laws that nobody else can or will teach you about. Here, we only have one major goal—to free as many student debt slaves from bondage as may be possible. Everything else is secondary.

Now I want to make one thing very clear. I believe a solid college education is necessary in today’s America for most, not all, Americans. However, I do not believe our federal government, lenders, educators, and others should be supporting, promoting, or encouraging the student loan system and use of student loans under its current system designs—the once well-meaning system is now very predatory and violating of human rights—it is destroying the fabric of our society and youth through the modernized version of “bond slavery”–the chains and harms may be largely unseen but they are equally real.

That said, what follows IS NOT LEGAL ADVICE but is my opinion (based on my own Pro Se legal experience—I AM NOT AN ATTORNEY) and the reader is directed to seek qualified legal counsel for any and all legal questions and answers. This page is written in long form so I recommend that you bookmark it and read a little now, then come back again because there are some good nuggets of information throughout that can help you or others you know. As student debtors, we’re all in a similar boat so we should try to help one another, wouldn’t you agree?

Derek S. Asks

[A new] company ended up with my dept and pushed it into default without contacting me, now they have garnished [my] wages and taken my tax return without notification and without giving me a path to relief.

Morgan Responds

I would try to find a lawyer for say $1,000 package deal and then have the lawyer stop the garnishment and help me set things straight. Wage garnishment issues require lawyers familiar with the laws in your state as well as federal laws and nobody you are going to be dealing with is going to respect you but they will respect your lawyer. Also, once you get the lawyer, you should pick their brain and learn as much as you can so as to avoid the pitfalls of similar situations in the future. Wage garnishments are very often done in an unlawful fashion by debt collectors so stopping it can be relativity easy for a skilled attorney.

For those who have no possible way of hiring an attorney, then I suggest you get down to your local law library and start learning about the laws relevant to your case.

When writing letters to correct or stop bad situations, be sure you quote the exact laws (and penalties) involved for violators. Personally, I use a very militant approach and look for ways to cause as much damage and problems as possible to the companies and the individuals working for them as is lawfully possible—I file lawsuits, injunctions, and I sue them for violating my rights—I file criminal complaints with local police departments—in short, I become their nightmare and I, in turn, feel empowered instead of victimized. If every student debtor in the US fought back like I do, this terrible situation and Draconian systems and laws would be changed for the better—large numbers of protest actions get press attention and that gets the attention of law makers. Therefore, I encourage you to fight back and become a Student Debtor Warrior on the side of Right over Wrong (but make sure you stay inside the law with all your actions—don’t drop to the level of the criminal bankers, educators, and others).

My attitude when fighting back is that I may lose the fight, perhaps even in court, but I will learn in the process and the next time I will be more likely to succeed. Bill collectors absolutely hate those who fight back and I love making them hate me more than I hate them.

Now, to avoid these problems in the first place, it is imperative that the student borrower always stay on top of the payment process and the current loan holder’s identity and their contact information. Go to the National Student Loan Data System and sign-up to see your loan information. Keep in mind that the NSLDS offers a place to start but the data and information they provide is typically inaccurate and unreliable because it is based on a voluntary reporting system—that is to say, the note holders, etc. are under no obligation to report accurately or timely. The NSLDS is well known for being deceptive as well as lacking historical and relevant loan data—for example, the system typically does not show all the names and contact information of all previous loan or note holders or the original transfer dates for your student loans. It is one more example of federal government incompetency and deceptive practices favoring lenders over student borrowers.

Decades ago, lenders and note holders acted responsibly but today most act criminally or uncivilly so I document every single thing I do with them and keep a file on them and every person I talk to—I document everything and I demand full identification of the person I am talking to and if they refuse to give that information, I ask to be transferred to a supervisor and I demand the same from them—or I demand to know why they cannot identify themselves (if I still get no results, I send a nasty letter demanding transparency and accountability to the department head).

Anytime I mail a payment or letter, it is mailed USPS CERTIFIED MAIL (with no return receipt to cut my costs) because certification allows me to go online, track the package was delivered, then print it out and attach it to my communication, etc. file—the note holder can never legally claim they did not get it—I win in court and they lose). By law, every new note holder is required to notify the borrower at the time of note transfer (within 30 days, in most states). If they fail to do so (or they cannot prove they did so in a court of law), then often the courts will force the note holder to drop all penalties and costs that were incurred by the borrower from the point of transfer forward (e.g. put the loan back to original state it was in when the note transfer took place—e.g. the court will deny all late fees, etc., reverse garnishments, and so on). This is generally a simple thing to achieve in court by the borrower because the new note holders rarely send their notifications of transfers to the student borrowers by Certified Mail and hence have no legal way to prove notification (accept by an Affidavit, which can and should be challenged in Court on a variety of technical issues—namely that the signer cannot prove the notification was actually delivered to the borrower unless they personally delivered it themselves—the court is not legally allowed to assume delivery took place—proof is required when demanded so demand it). Again, a competent lawyer can make sure your rights are preserved and should pay for themselves—the key is to find a competent attorney for your issue (which can be very difficult these days).

Melissa S. Asks

…My interest rates are high, I’ve been unemployed since 2010 and [the note holder] refuses to work with me until I default and ruin my credit.  I believe they are guilty of predatory lending on many levels and cannot provide me with any further information than what is on their website.

Morgan Responds

First, I will respond to issues of interest rates in another section below. Secondly, never under estimate the value of the lender or note holder’s website for getting good information. I spend enough time on them to learn them by heart and I print the important parts and place them in a file for future “quick” reference. I call them and I keep calling them until I get all my questions answered. And when that fails, I send them nasty letters threatening lawsuits and criminal complaints, whatever the case may be (again, know the law and quote the law to them or this tactic is worthless).

As far as the predatory lending issue, that is a very complicated subject that deals with both state and federal laws. Many student debtor advice websites of the past and present have issued inaccurate and blatantly wrong advice on this issue. Most consumer protection laws will not safeguard you but there are other laws in your state that often can and will trump federal laws (usually because there is no federal law alternative) that can be used to help your case.

Finally, every student debtor needs to know that there are generally two or more entities involved with a given student loan: 1) the “lender” is the bank that originates or issues the loan, 2) the “note holder” is the company that holds the loan (either by purchase of the loan or in trust for another holder in due course). In most cases, there is no limitation on how many times a loan can be transferred or to whom or when it can be transferred—however, each transfer requires proof of notice by the new holder to the borrower (failure of which may entitle the borrower to penalties and damages that result from failing to properly notify and disclose the transfer—for example, if your credit is ruined because you sent the payments to the wrong note holder because you were not properly notified of the loan transfer, you may be entitled to recover significant civil damages)—seek legal counsel (you can usually get this answered with a free phone consultation with an competent attorney).

[Please notice I qualify that you must use a “competent attorney” who is highly experienced and trained on the specific law sets involved with your issue. In my experience, most student loan aspect attorneys are not competent on the laws that apply and can impose damages on the client due to their lack of competency on the issues or lack of understanding of prevailing case laws so be sure to screen your attorneys with a fine tooth comb—interview them well, and interview several of them, before hiring them].

Joshua O. Asks

I have a degree in biochemistry and MBA and I can’t find a job that pays enough to afford a life outside of living in a trailer for the next decade.  Student loans are predatory lending at its finest!!!

Morgan Responds

Over 50% of today’s college graduates under the Obama Administration are leaving college only to remain either unemployed or forced to take a minimum wage job. This statistic is a disgrace for the White House and Democrat Party and their respective policies. More importantly, it is a national disgrace that reveals how predatory and greedy our nation’s colleges and universities have become; instead of reducing the overhead and costs of going to college and proactively ensuring their student’s succeed in the job market post-graduation, they are running diploma mills—and the mills start in the Ivy League and make their way down. These problems could be solved if our leaders cared about the future of our youth but they do not anymore (based on their actions, not their rhetoric). For far too long, leaders have taken the “trick them and shut them up” approach to law-making, whereby they do meaningless changes to the law but sell naïve students on the concept as if it were a grand solution (which is never the case). If you want to fix the problem, you need to get involved with the political process deeply and help elect better leaders–forget party lines and vote people and student debtor issues and stances.

Tina V. Asks

…My loans went from about 30K to what is now 55K.  I have had many hardships throughout the years having to put my loans in forbearance.  I find this interest amount absolutely ridiculous now that I can start paying; however, the monthly amount they want is outrageous.

Morgan Responds

Yours is a common problem. We drafted the “Student Debtor Rights Act” bill proposal but were not able to afford lobbying it toward sponsorship in Congress. The new law would eliminate student loan interest and would ensure that one year in college could be paid back with one year of work post-graduation in the intended career discipline. It would have also restored the original 1978 Bankruptcy Reform Act provision that originally made discharging student loans automatic in normal bankruptcy (5-years post-graduation). It would have required full disclosure of all risks by lenders and would have ended auto-wage garnishment and other Draconian laws that are routinely abused, and much more. Sadly, our organization lacks the needed lobbying funds to promote SDRA and Congress generally only acts once Special Interests moves them toward it (generally through a legalized form of bribery known as campaign contributions or privilege buying). The lending, debt collection and especially the education system have powerful lobbies that promote laws that encourage higher college/ student loan costs and debts so laws like the one we propose have little chance of being adopted (we just can’t promise hundreds of lawmakers $25k or more each for their next campaigns, hence we have no influence on Capitol Hill—hence student borrowers remain unrepresented—most nonprofit groups claiming to represent student borrowers do not know or understand the laws expertly or how to fix them properly in order to help students and taxpayers or to repair the broken system).

Our nation needs college graduates and essentially compels our youth to spend 4 to 6 years or more doing nothing but school, but Draconian laws and policies are now demanding our graduates also become life-time indentured slaves to the federal student loan system. I can assure you that research proves our top educational institutions can lower their tuitions enough to meet the 1-for-1 goal [1 for 1 Rule = one year of school costs equals one year of post-graduation work and income / payments to pay for it] but they oppose it because it would mean for the first time that they would have to be business conscientious and accountable.

Maria V. Asks

I am overwhelmed with my student loan debt.  On Dec. 2010, I graduated…  Career services did not help me get job interviews although they held job fairs every once in a while.  As my loans were about to be due… I called to let the loan people know that I still didn’t [have] a job. They said that the only way to continue deferring my loan was to continue studying!  So I [went back to college]… Now I am defaulting on my private loan for over $2100/mo.

The private loan collectors… threaten to have my social security garnished…   If they do… I will become one of the many millions of homeless seniors roaming the streets of Virginia.

Morgan Responds

First of all, the advice your were given was illegal and had you documented it, you would have had an enormous legal claim against the company and the person who gave you that ill advice—you lost an opportunity to get out of debt—sorry. Going back to school to merely forebear loan repayments is a very bad idea because it just compounds the problems—if you cannot get a job with the lower level degree, you are not anymore likely to get a job with a higher level degree—employers want cheaper workers, hence minimum educated workers (as a general rule for most graduates). It is not until the worker picks up years of experience and perhaps a graduate degree along the way that employers wish to entertain such higher educated (and more costly) workers. An advanced degree is worthless unless it can pay for itself financially—the intrinsic value of the higher education may be a benefit, but the cost and debt burdens for a non-productive degree / education outweigh such benefits.

Many seniors are dealing with criminal student loan collection agencies. I say criminal because it is a criminal act to knowingly perpetrate extortion or loan collections fraud, which many student loan companies and their personnel do on a daily basis. This is one area of law worth your time researching and learning about as deeply as possible.

First, if a collection agency contacts me, I save every communication (all forms). I only respond in writing, never by phone, because there will be no record of my response and I need a record for my own self-protection. Third, if a loan collection company violates the law and I confirm they are violating the law, then I quote the law to them in a written communication (certified mail always) and ask them to cease and desist immediately. As soon as they ignore my demands and keep doing whatever it is they are doing illegally, then I assess the situation and usually have three possible paths to take—civil pursuits or criminal pursuits or both.

If the debt collector has not violated criminal laws, then I need to pursue civil remedies. That means I either hire an attorney or I file a lawsuit against them as Pro Se (if I can’t afford an attorney). Of course, before I file a lawsuit Pro Se, I go to the law library and learn what I need to know.

In many cases, the debt collectors are violating criminal law too and if they are being a nightmare to me, I want to do the same kindness for them—but through legal means.

I will then take my documentation and case paperwork to the local police station and file a criminal complaint against the debt collector (for violations of criminal statutes). My complaint will name any person I can identify connected with the debt collection agency as well as the agency’s head person or all of its corporate officers. The police may not want to assist me so I ask for a supervisor and bring a witness with me to hold them accountable too—if they fail to help me, then I document that as well and I file a complaint against the police officer who blocked me—I hold everyone accountable to whatever extent I can. I may even send a letter of complaint to the City Attorney’s or Mayor’s Office, and if that fails, to the State Attorney’s Office. In other words, I will be a “pain in the ass” to everyone who blocks my efforts to get fair treatment or justice or who tries to harm me—I fight back and eventually, my opponents get the message that abusing me is the wrong way to go.

Usually, if a borrower files formal criminal charges against those who breach the law, the perpetrators will change their tune instantly and suddenly bend over backwards to help (which is what they should have been doing beforehand). Of course, filing a criminal complaint is a last ditch tactic to get results but it is not a tactic that should or must be ignored when all other things fail to work. I am a student debtor warrior so I fight back and I fight to win—taking prisoners is not my goal–winning is!

[Note: The main tactic behind filing a legitimate criminal complaint with the police department against your lender or note holder or debt collector, when it is called for, is not to ultimately prosecute someone or the company criminally, but to get their immediate and full attention to the issues and matter at hand–to get the case resolved ASAP. When a complaint is filed, the company is notified by police and suddenly your case file shoots to the top of their priority stack and the company usually installs solutions and legal compliances immediately—which is the result you wanted all along but could not get without resorting to this last ditch tactic. Once you get results, you can drop the criminal charges and move on with your life, if you wish. And if you do not get results or compliance, the state will prosecute the company (or individuals) for you so there is no cost to you—you will probably save someone else from getting the same illegal abuse in the future. And once you have a criminal case record, you now have evidence useful in a civil case in the event you wish to file a lawsuit to seek damages.]

Seniors are the most abused of all student debtors by student loan debt collectors–it has become a national epidemic and disgrace to our nation and lawmakers who fail to stop it.

Social Security garnishment is often very easy to stop and some folks can do it themselves. Garnishment is limited to amounts (based on the yearly figure) of the Federal Poverty Guidelines (FPG), which is $11, 770 for 1 person in 2015 (48 contiguous states). That amount of your income or Social Security is exempt from garnishment by federal law. If you are making $14,000, for example, then the balance above the FPG can be garnished (e.g. $2,230). Assuming you are making under the FPG, then you can file legal paperwork in your local federal courthouse and have the garnishment stopped (and often all past monies taken from you in violation of the protected limits can be paid back to you along with penalties and damages). It is best to consult with your local legal aid or attorney.

[Note: There are some cases when a person can be found by a judge to be exempt from wage garnishments well above the FPG amount. For example, someone who requires expensive, medically necessary treatment to survive. Therefore, be sure to consult with a qualified attorney to see if your case qualifies for additional exemptions and income protections].

Also, if you receive a notice of garnishment and hearing date, make sure you go to the hearing with your proof of past and current income amounts so the judge can help you reduce the garnishment amount to the legal limits.

HINT: One good cost saving trick is to do the case yourself with an attorney who agrees (for a sum) to be your legal coach—some states frown on it but in the end, you are legally entitled to seek legal counseling so the practice cannot be prevented without violating your legal rights.

Claudia C. Asks

I have a Great Lakes student loan that I was not able to pay and was sent to a different company.  I finally got a good job and was able to start paying. Paid for 9-months under a Federal rehabilitation program.  It was then transferred back to Great Lakes.  Once it got there they said they had no record of my [payments of] $650 for 9-months and to send them my proof…  Yesterday I got to 1098e forms both from great lakes but to different EIN #’s.

Morgan Responds

When I deal with a lender or note holder, as a rule, I assume they are unethical and untrustworthy—actually, I assume they are criminals because most are. Therefore, I conduct my business and communications using verification systems—if I send a letter, I send it certified. If I need to hand deliver a package, I have a friend do it then sign a statement stating they did it (or I use a commercial courier). If I go to speak in person, I bring a witness and then ask that witness to record what happened after the meeting, while it’s fresh in their mind. If I make a loan payment, it is done by check so I have a receipt of the transaction that can be printed and used in court, if need arises. By assuming I am dealing with criminals (which I believe I am), then I will be on my toes and guarded at every moment—I always assume nothing and verify everything. I keep records as if I expect to go to court because those with the best records usually win in court.

I would first contact both of the note holders and demand a copy of all loan payment records from each one. Then I would reconcile those records against my own payment records and find out where the errors were. I would then document the errors in a letter (with any supporting evidence, such as their own records that they gave me) and send both companies copies along with a demand that they correct the problem and notify me of the correction within 21-days (and I would mail it certified mail). I would then follow-up with a phone call (about 10-days after the initial mailing) and make sure they are working on it—I would try to find the person in charge of repairing the problem (if possible) and document that in my records.

Valerie P. Asks

I have been on disability since 2007 – going back to 2003 –  I filed for loan discharge in 2008 – Was approved by NYS Higher EDU. Department of EDU turned it down stating [my doctor] never followed up… Social security wages [have been garnished]. I am sure I am not the only one.

Morgan Responds

I’m sorry but the federal government system is designed to abuse citizens, not protect them—bureaucrats think like lawyers and they write the codes that basically put everything in their favor and against you the citizen. That is the bad news. The good news is you have a winnable lawsuit and lots of other things you can do to become their nightmare from hell. And I am happy to share some of those with you now.

There are two ways to discharge a student loan. One is administratively and the other is in bankruptcy (yes, in spite of the junk you have heard, student loans are 100% dischargeable in bankruptcy if you qualify). In your case, you filed for a discharge of your student loans administratively through the NYS Higher EDU, which is a state authority (many have the same powers of the federal authority). All you need is a copy of your filing records and their responses. If you did not keep those yourself, then shame on you, however, you can get them by contacting your state records keeping office and making a formal request (which will also apply to any agency that went out of business in most states).

First, see if your doctors have copies of any of the paperwork they gave you or submitted on your behalf (assuming you failed to keep your own records, which you must do for now on). Next, get a copy of the records from NYS Higher EDU. Even if the entity no longer exists, the records do somewhere so start with the state’s record depository. Also, go see your doctors and have them certify you disabled since the earliest known date in their records. And contact Social Security and ask them for a copy of your original disability award letter (that is stronger and more powerful evidence than your doctor’s certification because it means the federal government already vetted your disability). With copies of everything (keeping one set of originals for yourself), send the Dept of Ed (ED) everything and tell them you intend to file a lawsuit against them unless they immediately review your case and issue a discharge starting from the point in time of your disability (send certified mail). Wait 90-days, then if no response, consider filing a lawsuit against ED through your attorney.

[Note 1: If you file a lawsuit against ED demanding disability discharge from the date of your disability, the chances are they will just issue you the discharge rather than go to court. In some cases, they may make you a counter-offer with a new or different approval date. If you think it’s reasonable for you and your case, then you can accept it and close the case. Or you can just keep fighting until you win a better deal.

The bottom line is that ED is operated by government drones who do not generally think but are trained seals who blindly follow codes and policies so they are going to block your every move to discharge using obscure language and perhaps even misquotes of the code-that is their M.O. In many cases, once you get the case in front of a judge, all that nonsense goes away and the judge will look down on them for abusing you and your rights and will grant the discharge at the earliest possible date to punish ED’s bad behavior. Filing a lawsuit generally results in securing a better deal than just putting up with their bureaucratic nonsense and hoops—they usually don’t have time for troublemakers so they will want your case wrapped up ASAP, which means you’re in the driver’s seat.]

[Note 2: I would not automatically file a new application for discharge with ED because that may reset the discharge date to a later date and thereby cause you to forfeit all those past monies that were collected unlawfully on your account—you should be able to get some or all of those monies back. I would demand my disability discharge start on the date the federal government or my doctors certified me disabled (or NY, which ever is earliest)–remember, there is a 3-year probation period during an administrative discharge, which most people have to go through, but you already did that time, effectively, so why be forced under that regiment again unnecessarily? My goal would be to get ED to certify my loans discharged as many years back as possible—they dropped the ball, not you! Then I would use that new official ED discharge paperwork to demand the note holders pay me back all the monies they garnished, etc. or I would sue them, if needed].

Once you get those records, I would send a Demand Letter with copies of the discharge to ED by certified mail. My letter might say: 1) you are violating my legal rights by not discharging my student loans on [date], 2) you are harming me by allowing [company] to garnish money they are not legally entitled to garnish so cease and desist immediately, and 3) I need you to respond within 30-days of this notice or I will file a lawsuit and you will be responsible for the added costs as well as may be held potentially liable for punitive and other damages. [This it is more powerful if you can have an attorney send the letter–but they are generally too polite for my taste.]

Again, research the laws that pertain to your particular case and if you can find any wrong doing, civil or criminal, then bring it to their attention immediately—point out the exact code or law number and quote the legal wording of the law in your correspondence. And if they are being really difficult and you believe criminal acts have been done, go down to the police station and file a formal criminal complaint against them—that will demand their attention (they generally want to get rid of people like you—all trouble makers—as fast as they can—so be the trouble maker, I say). I figure that if they are going to ruin my life, then it’s my duty to get even and do as much damage to them as possible, in every legal way possible—I want to discourage them from that sort of bad behavior.

Angie R. Asks

Myself and my Daughter are a victim of predatory lending … [The college] failed to qualify her for the loans based on her future income, leaving her [in] financial ruin.  [They issued] improper disclosures with no promissory.

Morgan Responds

You raise two good points. First, schools, sadly, are under no legal duty to make sure a student can afford to pay back their loans once they graduate. My proposed law would change that. Student loans, by this very fact, are made predatory but because the federal government is behind it, it’s legalized crime and its practice violates the 13th Amendment of the US Constitution (yes, many will argue against that notion, but not successfully in legal terms—I challenge any and all lawyers to prove me wrong—so far, nobody has been able to do it).

Your second point is well taken, which deals with proper disclosures. Unfortunately, there is not enough space allotted here for me to explain this issue properly. I would simply direct you your local law library and the contract law section.

Michael G. Asks

… Eventually, I declared Bankruptcy and filed under Chapter 13 (Personal Debt Reorganization) in April 2013 and that stopped the attempts to collect on my debts for now. … Since then, I have been trying to engage Nelnet about settling my debt if I just paid the principal amount, which was $23,000 in 2008 and is now $33,000 and spare change… I have been working full-time since June of 2013 and have saved up enough to pay off the principal, but nobody at Nelnet seems interested in talking to me about this.

Is there an attorney I can talk to about my problems with Nelnet and if necessary, represent me in any possible legal and settlement actions in any court (either California, Colorado or Federal)?

Morgan Responds

If I were you, I would contact the bankruptcy attorney that handled your original case and then ask them to re-open your bankruptcy and add your student loan to it along with a 5-year repayment schedule (once the 5-years is done per the terms of the schedule, the balance is discharged). If Nelnet does not respond, then the judge may order the plan unilaterally and you’re done.

HINT: You need to make sure you do the 5-years of payments perfectly (and the way I would do that is I would set up a savings account with an auto-pay system so payments are never late). And then in months when I had extra money, I would put it into the account until the balance equals what is owed over the 5-year term. That way I would not risk screwing up my discharge deal.

If your old attorney won’t help, find out why and get a recommendation from him or her as to who to use now. Ideally the attorney should be in your county but given you will only need to go to one or two hearings, it might be just fine to use a more distant attorney you are familiar with and then travel as needed.

Or perhaps you are no longer qualified for Chapter 13 so the plan will not work for you but it may apply to others (which is why I included the solution here).

Remember, as a rule, student loan note holders do not discount debt balances owed because the government insures the loans. If you have a chunk of money to pay down the balance then consider getting on the phone and contacting a manager. Tell them you have $xxx amount to send in. Arrange for your payment to be applied to the principle and get it agreed to in writing by fax or e-mail or letter before mailing the payment. The point is to make the payment and get the loan balance paid down as soon as possible. You need to eliminate the loan ASAP—period—-then never make the student loan borrowing mistake again!

Benjamin H. Asks

I’m not even finished with school, and the amount of debt I’ve accumulated to pay for just part of my education has me so far in debt that I can barely afford to buy groceries.  I even worked 30-40 hours/week to pay for my housing, food, and supplies out of pocket.

Morgan Responds

Chapter 13 can be one of the best and easiest ways to discharge student loans (if you qualify). Basically, your lawyer calculates your income and expenses and creates a creditor payment schedule that includes your student loan payments. Typically the repayment is a 5-year term and any debts left over are then discharged (including student loans). The trick is to look for a lawyer who is experienced with Chapter 13 and student loan discharges. You might also qualify for Chapter 7, however, that process is more involved and troublesome as well as costly with respect to the attorney. Talk it over in free consultations with several lawyers before you decide.

Also, I would stop incurring new debts and focus on paying off all existing debts while the interest balances are low–interest is what eventually mounts up the make loans too costly to afford.

Brandon W. Asks

…I had a Federal Student Loan (Stafford) in 2006. Circumstances lead me to file Bankruptcy in 2009 when the economy was at its worst. I made about $2,000 a year too much to file a Chapter 7, so I had a 5-year payment plan approved by the court.

It was discharged in April 2014 upon completion of 60 on-time payments. MOHELA was listed on my bankruptcy, as you are required to disclose EVERYTHING to file. The creditors had ample opportunity to file their claim, and it is their responsibility to know if it is processed correctly.

MOHELA transferred the debt to ECMC as soon as they got my intent to file. I never recognized them as a creditor. Especially not a Federal creditor. ECMC filed a claim, accepted payment from the Bankruptcy court at the rate of my unsecure creditors, and they are now billing me for the whole amount plus 5-years worth of interest… I am being billed for the entire amount distributed in 2006.

Morgan Responds

Under current case laws, it generally does not matter who owns a loan. Loan holders can transfer at will, even while a case is in court. The courts could and should prohibit it but they are typically on the side of lenders and not citizens or students so we’re stuck with bad behavior for now.

In your case, I would immediately contact my bankruptcy attorney and explain what is going on. I am not as familiar with Chapter 13 but it is my understanding that once the judge approves your payment plan and the student loan holder has not formally objected or filed a motion to prohibit it, then that is law–the balance is discharged. In other words, you made your payments on time and the balance of your student loans was then automatically discharged inside the bankruptcy. If that is the case, then the you are legally entitled to file a lawsuit against ECMC to recover damages plus all the extra monies they got from you over and above the payment plan. There are also other penalties. The Bankruptcy lawyer you originally used should be able to help you (and ultimately, at no cost to you—ECMC will likely be made to pay all costs in your case so be sure to contact your attorney).

If you were acting Pro Se for your Chapter 13 case, then I would now hire an attorney to help me correct the filing errors, etc. so that ECMC is put in their place. You may need to re-open the bankruptcy or you may already be fine legally and just need to assert your legal rights. In either case, you must have an attorney at this point—especially if you did everything correctly and ECMC is violating bankruptcy laws (which is very common)—your attorney will usually be glad to take the case in such an event because the law forces ECMC to pay for your attorney’s fees when they violate your rights—you can never do enough damage to ECMC, in my book.

John K. Asks

I labored three years for a university which promised tuition in exchange for professional services (computer science). When I sought legal assistance the university blackballed me and has prevented me from obtaining employment by lying to all prospective employers while interest on loans has more than doubled. I have a letter from university employee who hired me attesting to the contract and statements from potential employers. I am unable to marry my fiancée due to these crimes and have no hope of living a free life although I am a veteran who served my nation with distinction and conducted research to establish national industry-led skills certification curricula for millions of US secondary students (endorsed by Microsoft’s AATP program and Novell’s NEAP program).

Morgan Responds

Thanks for wearing the uniform to help protect America. I’m sorry but this administration appears to be anti-veteran and anti-student debtor and many other things and it does not look like things will get any better for a long time.

You have a complicated case. If you can provide any evidence that you were blackballed, as you say, then you have a major lawsuit to file so go find an attorney and go after the bad guys. We need more people fighting back because that is what, ultimately, forces the changes needed to the system.

Alyson W. Asks

When I signed my promissory note in 2009, I was optimistic that the variable rate loan, then at nearly the upper limit of legally permitted interest rates, would almost certainly lower its interest rate by the time I was out of school, and if not, after I started repaying. Fast forward two years and three lenders later, and Great Lakes tells me that all their student loans are fixed-rate loans. Not sure how my loan changed from the variable-rate loan that I signed up for to a fixed-rate loan without my knowledge or consent, but had I known that this was a legal possibility, I never would have signed on for a loan in the first place. Now my husband and I have a mortgage’s worth of loans at which the sixty thousand dollars we’ve thrown over the past three years have barely made a dent.

Morgan Responds

I would look at the promissory note or loan contract with a fine tooth comb and see if they were authorized to switch it to a fixed rate loan unilaterally (without your consent). If not, I would send them a Demand Letter telling them to switch it back and respond to me within 30-days, refund any monies I overpaid, or the matter is going to court. I would include a copy of my promissory note (and highlight, if applicable, any clauses that pertain, especially any attorney’s fees clauses which are reciprocal under most state laws). If they don’t back down, then I would grab an attorney and go after them.

Personally, I think variable rate loans should be made illegal because they lull too many people into believing loan affordability when it’s not true. Small jumps in interest rates can cause big payment hikes and make loans unaffordable. Most people dislike surprises and having your student loan spike a couple hundred dollars per month can be a big hit that is difficult for many people to handle.

Also, if  you have paid $60k in three years and your loan principle is not much dented, something is wrong. I would go over everything with a fine tooth comb and see what is happening and why.

Kelly V. Asks

…You can’t declare bankruptcy on student loans so the banks don’t have to qualify the debtors either and encourage the student to take out as much as they can….

Morgan Responds

WRONG! Student loans can be discharged in bankruptcy (both Chapter 7 and Chapter 13). The people who put out that propaganda are usually working for the student loan industry in some capacity so quit swallowing that garbage and learn the facts. Go to a law library or call an attorney.

I covered the issue of “qualifying student debtors” issue above. However, the rule of thumb today is that of those who apply for discharge of their student loans in bankruptcy (Chapter 7), about 50% are discharged (and that number is rising)—the sad part is most people fail to apply for the discharge so they lose out.

If you filed bankruptcy in the past and you believe you still qualify for bankruptcy even now, then talk to an attorney and see if you qualify to reopen your bankruptcy and have your student loan discharged. A free phone consultation is all it takes to get started.

HINT: If you are financially struggling, consider hiring an attorney be your legal coach, not your case lawyer. If you do the entire case as Pro Se, you can save a lot of money you don’t have. An attorney can cost from $10k to $40k for a Chp 7 student loan discharge case—you may be able to do it on your own for basic out-of-pocket costs and $250 to $500 a month to your legal coach who checks your paperwork, etc and gives you hints and ideas, etc..

John M. Asks

I am unemployed and can not pay my loans, yet the school I went to claimed to have job placement help, which in reality was a cork board with the help wanted ads. Thanks [omitted] for screwing me over, I ended up dropping out and joining the apprenticeship here in Colorado. Wish I would of known before signing the bottom line….

Morgan Responds

I tell students to NEVER take out a student loan. Pay as you go and go slow if you must but NEVER become a debt slave to the federal government because it is often for life!

Next, NEVER believe a school is going to help you get a job. It is rarely true.

I tell everyone leaving high school to go fulltime to a community college (if they can) and get an Associate’s Degree. First, it offers the best cost-to-value deal anywhere. Most students can easily pay as they go. Secondly, it gives the student a chance to learn more about the world and find out where their interests lie—it is always best to be certain of a college major before starting on it because changing it can be costly. Therefore, I would go for the cost (and debt) friendly Associate’s degree option first.

Some community colleges are now offering 4-year degrees (finally) and those can be an exceptional bargain worth considering (mostly because you can often pay as you go rather than mount up debts for post-graduation day).

Next, after one has an Associate’s degree, I recommend leaving college and going to work full time to get experience. Many students get into the real world of actual work and change their minds about what they would like to do in life for a career so why not make money while you figure it out—meanwhile, you’re still out of debt while everyone else wishes they followed your path instead.

Finally, once you decide on a college major, you can use you Associate’s degree to enter college (such degrees usually transfer to most anywhere as long as your community college was well accredited, which is usually the case—just verify beforehand). I recommend students consider working part-time or full time and paying for the college as they go so that when they graduate, all the money that they earn they will get to keep (except what the government steals by the way of taxation). There are many colleges these days designed for full time workers so research them and see if they will fit the bill for you.

I personally consider Ivy League schools a waste of time and money unless your parents (or you personally) have extensive social connections because many graduates lacking those connections will not reap the cost-to-benefit rewards from such schools. The education is not generally anymore superior, the social and networking connections are the key values added for Ivy League graduates. If you were not born to a “privileged family and life”, then why bother trying to get into such expensive schools that will only ensure higher post graduation debts—debts often unpayable by the “under-privileged” graduates.

The bottom line is the students who do their homework and consider all the angles and possibilities before making any big decisions, like going into debt or going to college or choosing the right college, are generally going to come out ahead of the pack—they will have far less debt and turmoil in their life. So follow Davy Crockett’s advice: “Be sure you’re right, then go ahead.”

Tyler W. Asks

Growing up in a low-income single-family household, I recognized the need to go to college.  That being said, I went to an art school that was perfectly comfortable loaning me $75k with the full knowledge that most of their graduates do not make the kind of money that will allow them to pay back that kind of debt in a lifetime.

The good news: I wound up changing fields and earned my Masters in Education (which I am proud to pay back); however, my long-term debt picture is abysmal, and I feel that as a 19 year old with no real choice[s], I have fallen prey to the unethical policies of my alma mater.

Morgan Responds

Millions of students feel the same way, I am sorry to say.

I know of many college age people that skipped college altogether and are making far more money than their college graduate counterparts—they are keeping their earnings instead of paying them to student loan debts.

Most of the jobs under the current administration are in the low paying service sector in 2015—90% of those jobs do not require a college education yet 50% of all college graduates will be forced to take such jobs. Therefore, college could be a mistake for many.

[I personally believe the data reveals these disturbing trends are due to Democrat Party policies of anti-capitalism in support of communism or socialism programs—which is why our society is growing the poverty class at a phenomenal rate while the standard  of living is dropping like a stone.]

My advice is usually the same for everyone—-sacrifice all you must to pay your student loans off as fast as you can because until that is done, you are and will remain a life-time debt slave to the federal government. And if you are on hard times, use bankruptcy and other options to eliminate student loan debts.

Finally, be wary of Alternative Payment Programs. I would never sign-up for one because they force the student debtor, in most cases, to a 25-year mandatory debt term and can eliminate bankruptcy discharge options. All they do is defer debt, they do not eliminate it or reduce the principal or running balance of the debt (until reaching term). Frankly, I believe these are criminal loan programs—-what student wants to go to college for 4 to 6 years full time (not earning money, in most cases), then leave college and spend the next 25 to 30 years of their life in debt to the federal government to which there is no means of escape—-the entire point of going to college is to better one’s self economically so that sort of scenario defeats the entire purpose and intent of the college education system. It’s insane!

If I came to you and said, here is a free car. You can drive it for a few years but when you are done, you are my bonded slave for the next 25-years—you will work solely to enrich me—would you do it? Why is a college education give-away deal that does the same thing to your freedom any different? They both end in your slavery—only the lucky ones will escape 50% of the time (and that number is shrinking as we speak). Therefore, do not fall for the student loan debt trap set up by a predatory federal government and Congress—be smart instead—beat the system by staying free of its caustic and deadly slave debts—so you will not need to come to websites like this one and try and learn how to get your freedom back!

When enough students wise up and say no to student loans, the system will change and tuitions will drop dramatically. Until then, be wise and teach others. Spread the word. And God Bless!

2 Comments on "Student Debtor Questions Answered"

  1. Student Debtor Warrior (in training) | June 23, 2015 at 6:13 am | Reply

    This site has been extremely helpful, but now I am freaking out. I have 200+k in loans for a graduate degree with a criminal??!? Aaaaah! Originally my lender was great but after a few bumps I now see what you mean. I was paying automatically on time every month since my payments began. I was using the IBR plan. It lapsed one month and payment shot up to 2k vs $500. I reinstated IBR immediately and was told by a rep that the 2k I paid would be put toward future payments. It was not. Several phone calls were made back and forth, and then I was finally told by a rep to dispute the 2k payment with my bank, which I did, and voila! I got the 2k back. HOWEVER, the lender then reported that amount as late >120 days to the credit companies and destroyed my score literally on the same day I was buying a new car expecting a great interest rate, not 17%. I called again and they said I needed to send all supporting documents to credit dispute dept of the lender. So I did. Then I got a letter back a few weeks later with basically a one sentence response. “All credit reporting is valid and accurate”. No changes were made. Today, I’ve decided to get a lawyer.

    • Your story is common. The lesson is: 1) Keep copies of everything! 2) never set up auto-withdrawl on your banking account (use an account you can close instantly, if needed . ie a special savings account for e-payment purposes), 3) ALWAYS send correspondence by CERTIFIED MAIL with respect to stu-loan issues, 4) if you can take time, learn how to file INJUNCTIONS as PRO SE and stop credit reporting agencies and creditors from misreporting facts, 5) Learn how to sue anyone needed as Pro Se (because lawyers do not usually help student debtors without great expenses paid up front), and 6) tell everyone you ever meet who will listen—NEVER, EVER, EVER, TAKE OUR A STUDENT LOAN—it is a organized crime system designed to literally enslave students for a life-time and too often destroys more lives than it helps! –Mike, SDWP Volunteer Services

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