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Late last year I was contacted by a collection agency named "Financial Management Services." The CA is contending I defaulted on a student loan in 1985. I would like to outline some particulars and get some advice and opinions.

I don't have the paperwork in front of me but the total owing is about $7k. About $2k of that is principal, $1k in collection costs and the remainder is interest.

I definitely attended the school the CA is talking about. I left the school in 1979 and had attended on the GI bill. I have absolutely no recollection of borrowing any money to attend the school. I am not saying I didn't borrow it, only that I don't remember borrowing it. I can't imagine why I would have borrowed the money since, like I said, I had the GI bill which was much better in those days than it is now.

I have requested, in writing, a copy of the original promissory note with my signature. I sent this certified mail, return receipt requested. This was late January of this year. I did get the receipt back indicating that the CA had received my letter. To date, despite my written request and several verbal (via phone) requests, I have yet to receive the promissory note.

About every other week the CA will call, threatening to garnish my wages. I remind them that I have requested the promissory note. They admit to being able to tell I have done that and that ends the phone call. A couple of weeks or so later, the process repeats itself.

In the mid 1980's, I filed bankruptcy. I know that now student loans are generally not dischargeable through bankruptcy but I understand that at some point they were. Without the promissory note I have no way of knowing what the rules were when I allegedly signed the note.

I want to resolve this. I am thinking of asking the CA to proceed with the garnishment at which point I will ask for a hearing and see if I can get the promissory note through that process.

When I have a phone call from the CA and remind them of the request for the promissory note, they indicate that they will request it from the Department of Education AGAIN. They indicate that despite having previously requested the PN, they have heard nothing from ED either in the form of getting the PN from them or some indication from them that they are unable to locate it. What happens if they are unable to locate the promissory note? This thing would have had to have been signed prior to 1979, near as I can guess.

Here is my thinking. If I owe the money and they can prove it, I want to pay it. I have the money and will not have to make payment arrangements. If the loan was discharged under my BK, I don't owe the money. Lots of thing here hinge on what the promissory note says, assuming there is one and that it contains my valid signature.

My wife kind of seems to want me to just settle this thing since it amounts to such little money and I am thinking about that too. I mean, it might go away for awhile if ED can't come up with the PN but what if 10 years from now the PN suddenly appears? Then I will just owe that much more interest. If I could get a settlement proposal in writing from ED so this never comes back to haunt me again, I might be willing to consider it assuming we can agree on the numbers. I am thinking all of the principal, 1/2 of the interest and no collection costs might be worthy of consideration.

So what do the experts think? Should I just hold out until they either produce the note or garnish my wages, the request the hearing? Should I suggest a settlement offer?

It is my opinion that this was probably not discharged. The laws back then required 7years between the time the loan became due (when you entered into repayment) and the bankrutpcy filing.

You can look up your loan at NSLDS. Were your tax returns ever offset???

There are cases where the prom note cannot be located. However, all they then have to do is show when and how much was paid to the school on your behalf. If you attended a big school, there should be record of the federal payment to your student account.

I know the GI bill was better back then, but it still did not cover everything.

Sub: #1 posted on Tue, 04/24/2012 - 00:48

Moderators Cum Industry Expert
(Posts: 17209 | Credits: 4746.14)

Thank you for your comments, Soaplady.

>>You can look up your loan at NSLDS.> Were your tax returns ever offset???>There are cases where the prom note cannot be located. However, all they then have to do is show when and how much was paid to the school on your behalf. If you attended a big school, there should be record of the federal payment to your student account.>I know the GI bill was better back then, but it still did not cover everything.

Sub: #2 posted on Tue, 04/24/2012 - 01:15

odieisagooddog odieisagooddog

(Posts: 6 | Credits: 2.02)

I have applied for a PIN on NSLDS website.

Yet another strange thing on this deal. Even though I have supposedly been in default since 1985 I have heard NOTHING about this until the call from the CA late last year.

Sub: #3 posted on Tue, 04/24/2012 - 02:13

odieisagooddog odieisagooddog

(Posts: 6 | Credits: 2.02)

When I was working financial aid, it seems to me that VA benefits gave a money stipend in addition to tuition benefits. Even with those benefits, a lot of veterans still had to use stafford loans to meet there cost of attendance. I worked at a public school....tuition for private trade schools even back when you attended was still probably expensive.

As for the CA, they should NOT be contacting you until they validate the debt by whatever means. I would definately suggest filing a complaint with the student loan ombudsman.

Sub: #4 posted on Tue, 04/24/2012 - 03:04

Moderators Cum Industry Expert
(Posts: 17209 | Credits: 4746.14)

You are being most helpful, Soaplady. I really appreciate your effort.

>>As for the CA, they should NOT be contacting you until they validate the debt by whatever means. I would definately suggest filing a complaint with the student loan ombudsman.

Sub: #5 posted on Tue, 04/24/2012 - 03:18

odieisagooddog odieisagooddog

(Posts: 6 | Credits: 2.02)

Thought I would take a minute to update you kids on this situation.

About 6 weeks ago I contacted the Department of Education via phone to request a copy of the promissory note. They told me that it would take 3-6 weeks to get it and the agent I spoke to said she had never seen an instance wherein they were unable to locate the note. An agent from the CA also said he had never known them to fail to produce the note.

Additionally, the agent from D of E told me that requesting the promissory note is very reasonable. He said they get asked for the PN all the time and send them out all the time.

Well, between the CA and me, we have been trying to get a copy of the promissory note since the end of January. We still don't have it. I am beginning to think that I am that one in a million for whom they are unable to locate the note. The information I have gather leads me to believe I allegedly signed this note in 1978.

Last night the CA called to see if I had received the promissory note. They have heard nothing from D of E on their many requests for it.

The CA, some weeks back, offered to settle this issue for half of the interest, all of the principal and none of the collection costs. This amounted to about $3800.

When I talked to the CA last night, I told him it is looking like D of E is going to be unable to prove I am responsible for this loan as they haven't produced the note after all this time. I expressed to the CA my concern that even if D of E elects not to pursue this issue because they can't produce the note, that it may in fact turn up 5-10 years down the road and I would owe that much more interest. I offered to settle for $3000. He said that seemed reasonable but was beyond his authority. He said he would contact D of E today with my offer and call me back tonight.

So that's where it's at right now. I will let you know how it resolves.

Sub: #6 posted on Wed, 05/30/2012 - 20:57

odieisagooddog odieisagooddog

(Posts: 6 | Credits: 2.02)

I, too, was contacted in January by Collections Agency, FMS, regarding defaulted federally insured student loan (FISL) from 30 years ago... $2,300 borrowed in 75/76... Began repayment in 78... Filed bankruptcy in 82/83 due to very inequitable divorce settlement, and do recall it was uncertain whether student loan had been discharged by bankruptcy. It was all very confusing back then as the laws were changing a every couple years. I paid on the loan all through 10 months of bankruptcy proceedings, but when final dishcarge came through, no indication the student loan had not been discharged. Attorney adivsed me to stop payments but hold on to loan records & pmt. coupon book, and wait to see if I heard from ED. Only thing I received after 83 bankruptcy discharge was a single page loan statement from ED in 84, 20 months after discharge. Statement only showed my name, addresss, loan number and a $0.00 balance... no detail or explanation as to what prompted the statement so long after the fact, & no cover letter or directions of any further action required on my part.. I thought it was confirmation the loan had indeed been discharged. A few months later I relocated to another state and never gave it another thought. I've put myself through hell and a fair amount of expense the past 7 months trying to gain an understanding of how this old debt could be hanging out there in default all these years, totally unbeknownst to me... no notices from ED, nothing ever on my credit report. I kept all records of my FISL until 1990, 7 years past my bankruptcy & final payment and 6 years after that $0.00 balance statement had come (the statute of limitations on student loans at that time). Statute of limitations was apparently removed retroactively in 91, which I did not know until just recently. But can't use that as excuse not to pay, per ED regulations. It is, however, my reason for no longer having any student loan records or cancelled checks to prove anything. I kept my overall bankruptcy file for 27 years & never needed it for anything, so shredded it in 2009. Then comes this call from FMS in January of this year. At first I thought it was a scam call so did not get the name, address or phone number of the CA right then, nor did I catch the what the agent told me was the exact $ amount owing. I now know the remaining amount due at bankruptcy dishcharge was close to $1,200. With 30 years interest & collection costs, balance owing is almost $5,000 now. NSLDS lists my bankruptcy as occuring in 84, not 83 when it actually occurred. ED's Default Resolution website shows very limited payment history, which is neither complete or acurate. No statement of debt was mailed to me by FMS within 5 days after initial contact as their required to do. In fact, no basic written statement of debt came for over 4 months. In a second phone contact 3 weeks after 1st call, and in certified, return receipt letters I mailed FMS in Feb. & again in early June, I requested full debt validation to include copy of original promissory note, payment history, copies of previous default letters mailed to me, and any records ED has relative to my bankruptcy. To date I have received nothing except 2 more standard letters from FMS telling me what would happen if I don't pay. I did, through considerable effort, finally receive a copy of my bankruptcy file last week, which it took the court over 5 months to locate my case number and location of the file at Federal Records Center. It cost me $105 to get a certified copy of the complete file. It, more than anything else has helped me fill in some of the blanks as to time-lines, etc. Much to my surprise, it also included a copy of the original student loan promissory note. Neither the promissory note nor anything in my entire bankruptcy file references the student loan as being non-dischargeable. I've received quite an education on the student loan crisis in America this past 7 months... a crisis I was unaware even existed until being contacted by FMS in January. The numerous ED and other websites have been cumbersome to navigate... basic information on each of them, but to get answers to specific more detailed questions, I've had to spend litterally a couple hundred hours researching. What a fricken nightmare! I'm in a holding pattern right now, trying to decide what to do. I, too, am considering just going for a compromise settlement, simply to put this whole ordeal behind me. I've invested way, way too much time, energy and money in dealing with this only to have not gotten much of anywhere except more enlightened... in particular as to the fact this is just one more aspect of our federal government that's really screwed up to the detriment of the people it's supposed to serve. I may ultimately contact my congressional reps... not so much about resolving my issue, but to put in my 2 cents worth as to why the ED loan system needs to be revamped to include restoring most, if not all, consumer credit protections that have gradually been taken away over the past several decades. I haven't yet registered on this site, but have bookmarked it and will check back to see if there are any further comments on this overall subject. Not sure my comments here will post without registering??? Until today, I have been completely unable to find anyone's story who came close to mine. It's seemed everyone else with old student loan debt knew they were in default. Thank you for sharing yours!

Sub: #7 posted on Sun, 07/22/2012 - 04:43


Your bankrutpcy discharge states "all dischargable debts are discharged". Your loan was not dischargeable. Back then you had to be in active repayment for 7 years in order to qualify for bankrutpcy discharge. Your attorney is at fault for not looking up the proper statutues.
The bankruptcy courts originally treated student loans the same as any other unsecured debt. Student loans could be listed in a Chapter 7 filing and fully discharged. However, in 1976 Congress modified the Higher Education Act of 1965 and required student loans to be nondischargeable unless: (a) the debt first became due more than 5 years before the date of filing of the bankruptcy, or, (b) failure to discharge the debt would cause ???undue hardship??? to the debtor or to dependents of the debtor. In 1990, Congress extended the 5 year rule to 7 years and eventually eliminated the time limit altogether in 1998.

As an FYI....the DOE does NOT need the prom note to collect. Back when you borrowed, individual borrower checks were issued. They can so a chain of the money transfer. I can understand it taking a long time to find your note...your would be under the old micro fiche system which means your FFELP lender would have had to been contacted and the DOE would be waiting on a third party to get the note. It is a manual process...not computerized as it has been since about 1995.
This is costing you money daily....get it resolved as quickly as possible.


Sub: #8 posted on Sun, 07/22/2012 - 07:35

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