In this post, we provide a very rare document: The Private Collection Agency guide to federal student loans 2009-pca-procedures (1), the U.S. Government’s guidance on how to handle defaulted loans as outlined to Private Collection Agencies (PCAs).
You may want to check on these additional instructions on Student Loan Settlement. Even if your loan is not being collected by a PCA (private collection agency), the information may have value as you evaluate all of your options. Do your research and obtain legal assistance; Let this be the beginning of your pursuit for debt freedom. And check back for our infrequent but worthwhile blog posts. A settlement is not guaranteed and you may have to have at least tried some other options beforehand, such as income-based repayment.
For example, page 42 has a recommended Rehabilitation letter. Many borrowers believe that Consolidation out of default is their best option, but you may want to obtain legal assistance with your decision. Subsequent pages have a pre-garnishment settlement letter as well as a post-garnishment settlement letter. These letters are sent by the PCA to you and, by reading them, you can gain insight into how PCAs work. There is also a Compromise Agreement Letter on page 54. Most importantly, Chapter 6 outlines how to make a settlement (compromise) on your federal student loans with a Private Collection Agency.
In Chapter 6, directs them to request payment in full of your student loan at first and, when they are unable to collect the full amount, they have the option of offering a settlement instead (which is discussed in Chapter 7), or to establish a repayment schedule (which would be regular monthly payments on the account).
In the PCA manual, repayment programs are listed in Chapters 9 and 10. Generally, a PCA will seek to have the loan repaid over 60 months. Also, click here for additional information about settlements on student loans and credit cards.
If you are offered a reasonable and affordable payment schedule, then you may want to specifically ask about special repayment programs. Under “Repayment Schedules” on page 68, you will notice that it states “Though not required, initial down payments may help borrowers reach account resolution more quickly or enable borrowers to afford program payment amounts.”
What this means is that down payments on your debt are not required but the PCA will encourage you to make a down payment so that the balance of the loan is reduced and, therefore, the monthly payment is “more affordable” during any proposed 60 day repayment plan. Just like a down payment is not required, a 60 month repayment plan is probably not required either.
If you negotiate a settlement, the tax implications should be considered. Do not rely on this my ed account information without obtaining legal assistance. You may want to avoid student loan chop shop scams This site is not associated with any government site or any federal loan servicer.