Author Topic: TSP 1510 Student Loans Question  (Read 2213 times)

Offline helix2301

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TSP 1510 Student Loans Question
« on: February 03, 2015, 08:45:30 AM »
Are student loan forgiveness programs legit, some are, most are not?

I agree with Jack a lot of these companies that forgive student loans are crap and a scam. How ever my dad has a student load officer for a bank for years companies like

http://www.aessuccess.org/

Where they can give you a lower interest rate on your loans and stretch them out a bit can help you actually save money. After 2 years of good payment then even drop the interest rate even more.

Plus a lot of people are paying student loans when they could actually temporally differ there loads. Loan forgivess I am not sure about but reconsolidation is a good thing. Re-consolidating student loans does not go against your credit. It actually can help your credit cause of debt to income radio.

Offline gopack84

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Re: TSP 1510 Student Loans Question
« Reply #1 on: February 05, 2015, 08:03:30 AM »
I used to work in the collection business. Outside of some special circumstances as described in the call, "debt forgiveness" is a complete hoax. There is no such thing. Why would a lender do this ever? They have a binding legal contract that says you owe them money and in most cases also defines the interest rate and penalty structure for late payments. There is zero incentive for anyone to ever "forgive" a loan ever in the private sector. The government backed loans are a whole different matter because the government can always get money. A private business can't.

So when a legitimate company (like AES appears to be) offers deals to assist you, what they're usually doing is trading money today for money tomorrow. They will not often save you money. They will improve your cash flow in the short term by lowering your monthly payment but you'll end up paying more long term because your principle owed does not change and you'll just be paying and accruing interest for longer time on more money. Obviously if they really lower the interest rate it can save you money but that happens pretty rarely.

As is most often is though, the devil is in the details. They *MIGHT* be able to lower the interest rate. It depends on how the loan is created. Is it a purely private student loan made by a private company or is it subsidized by the government? Depending on who created it, the options to change it later are different. And in some cases interest is deferred while you're in school and not making payment and in some cases interest is accumulated while you're in school and not making payments. You have to know what your loan says and what you are getting into.

The collection and loan industry in general works something like this. Lets' say you take out a loan for $1000 at 10% and you pay it back in a year. So at the end of the year, you've paid back 1100 and the lender made $100 on you. If you don't pay it back, he has a couple of options. He can work with you to lower payments in exchange for longer time. He can sue you and win a judgment (that he still has to collect on, it's not an automatic check in his pocket). Or he can write it off as a bad debt in which case any loss he sustained becomes part of his business expense to soften the blow on him a little. In most cases, he will eventually sell the loan itself to a 3rd party at some fraction of the face value so he gets some money back but not all but more than nothing. Loans can be sold and resold many times. The buyer may choose to add fees on top of the original loan and try to collect it or they may try to collect the original amount and they profit on the difference (let's say they bought the $1000 loan for $500 for example).

So how do these scams work? Most often if you really dig into it you'll find what they recommend is that you stop making payments entirely. Just stop paying. The original loan holder will attempt to collect and most likely fail because you're a slacker and have decided you're not going to be honorable and pay your debt. The debt forgiveness company is counting on the fact that eventually the original loan holder will write off the debt and sell it on the secondary market and you (or they on your behalf) will be able to negotiate a lower settlement with the new loan holder based on the fact that that whomever owns it now bought it at a discount. in the meantime, your credit rating is destroyed but they often don't tell you that's going to happen. It's also a little risky for you because being unable to pay due to financial circumstances is one thing. If you lose your job and can't pay, then you can't pay. If you're still working and just decide not to pay and you get sued and they win, they can (not always will, but CAN) garnish your wages. It's also borderline fraud. So if they can prove you just didn't pay to try to get out of the loan, I can see a way where you might wind up facing criminal fraud charges. Maybe(I'm not a lawyer).

This is all statistically driven. Buying old, dead loans like this is very risky for the collectors. And they are statistically aware of what their expected collection rates are etc. If they're bad at making these projections, they're not in business very long. Often these are old and mostly un-collectable debts, so if they buy a $1000 debt for $250 and you offer them $400 one time lump sum to settle it, then they'll usually take that because it's an instant win for them and they don't have additional costs in salaries and commissions and whatnot that they pay their employees (the bill collectors). And from your perspective, you just got a 60% discount on your original debt so you feel like you win too. This is true even if they tack crazy charges on top and their first document to you claims you owe them $3700 based on penalties, fees, years of accumulated unpaid interest, etc. In real terms, they paid what they paid for the loan and the rest is gravy that they use to create a big stick to scare people to death with and lock them into 10 years of $30 a month payments on a $250 investment. That's not really illegal, perhaps unethical, but it's not illegal.

It all depends on your original loan as to what both your and the lendors options are with regards to modifying the loan terms later. But in the end, usually "debt forgiveness" is just a scam.

Offline raginrick

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Re: TSP 1510 Student Loans Question
« Reply #2 on: May 10, 2015, 02:39:09 PM »
Thanks for both comments. I actually called in the question and my hunch was right. I continue to pay back my debt without the help of some other company. Hopefully in a few years I will have it all paid off.

Offline Mark Shadow

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Re: TSP 1510 Student Loans Question
« Reply #3 on: November 12, 2015, 08:04:17 PM »
I stumbled across the best loan forgiveness program out there (IMO only).  I joined the military after college.  I sort of did a reverse GI Bill.  One third of my loans were paid off each year.  I was in the Army.  It worked out well for me.  I was in the best shape of my life, learned leadership skills, fired more bullets than I could ever hope to, and learned how to fall out of an airplane.  Three years of the best years of your life is a high price, but for me it was worth it.  As a matter of fact, the amount of shear disposable of income available to me at the time was considerable.  I had a clunker but reliable car before I went in so no car payment, no credit cards and no housing/food costs!

osubuckeye4

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Re: TSP 1510 Student Loans Question
« Reply #4 on: November 13, 2015, 02:19:40 PM »
Gopack pretty much nailed it.


"Forgiveness" programs are generally complete scams. You're generally going to still end up owing a lot of the amount, and you'll destroy your credit in the process.


That being said, there are some legit consolidation programs (lowering your interest rate, which lowers monthly payments), and some lenders do have programs that they will offer to low-income repayee's to make payments more manageable.


Before going to any "forgiveness" company that is going to promise you the world and omit a lot of the actual details... call your lender first and explain your hardship to them and see if you can work something out that works for both sides.

Offline Mr. Bill

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Re: TSP 1510 Student Loans Question
« Reply #5 on: April 26, 2018, 11:51:43 AM »
Necro-posting with some cautionary information: don't be too quick to trust financial advice from student loan experts.

The Chronicle of Higher Education, 4/24/18: Drew Cloud Is a Well-Known Expert on Student Loans. One Problem: He’s Not Real.

Quote
Drew Cloud is everywhere. The self-described journalist who specializes in student-loan debt has been quoted in major news outlets, including The Washington Post, The Boston Globe, and CNBC, and is a fixture in the smaller, specialized blogosphere of student debt. ...

After The Chronicle spent more than a week trying to verify Cloud’s existence, the company that owns The Student Loan Report confirmed that Cloud was fake. "Drew Cloud is a pseudonym that a diverse group of authors at Student Loan Report, LLC use to share experiences and information related to the challenges college students face with funding their education," wrote Nate Matherson, CEO of LendEDU. ...

Cloud was not the only facade. The website’s affiliation with LendEDU was also not previously disclosed. ...

Cloud may no longer appear on his own site, but his footprint in the wider world remains. He was quoted by a number of media outlets this year in connection with a survey finding by The Student Loan Report that one in five students had used money from their student loans to invest in digital currencies. Experts in the field told The Chronicle that the study’s opaque methodology raised concerns.

Cloud has often appeared on financial-advice sites, either as a guest writer or as the subject of an interview. In those cases, he doesn’t mention where he attended college, but he does mention that he, too, had taken out student loans.

When people reached out to Cloud for his expertise on student debt, he often suggested that they refinance their loans.

That’s one of the services offered by LendEDU. ...

Offline bsteimel

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Re: TSP 1510 Student Loans Question
« Reply #6 on: April 27, 2018, 09:43:58 AM »
Good information here.  I just wanted to say that AES is very much a legit company.  If you get a loan through pennsylvania it goes through AES.  I went to a Pennsylvania State School and you have to use AES if you want any kind of Pennsylvania Grant money.  AES reports to PHEAA which is managed by the Pennsylvania State House. 

Having said that though, every loan must be read in detail.  AES is available to help but the person above is right, they may help your cash flow by making your loan longer but you will pay more.  Some people this may be needed, some people this may hurt.  Even a company that is legit may not present a plan that would work for everyone.  I used AES to service my student loans.  I refinanced them to a longer term and a lower interest rate.  I made a commitment to pay loan off by a certain amount of months long before the term of the loan.  This commitment may not work for everyone.  It worked for me, I paid the loan long before it was due, it also enabled me to pay minimum payments for a time while i took an internship that payed way below what i actually needed.  Once the internship was over my salary was bumped to what i thought was reasonable.  If i didn't have the flexibility i would have never taken the job and never learned the skills and probably would be in a worse situation.