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PAYE Qualification if currently in default

Started by Geeharry, October 23, 2016, 01:44:34 pm

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Geeharry

Hello,

I have a direct Stafford subsidized loan for graduate studies that I originated in 12/2012. I completed 50% of my studies when I had to put it on hold. Since that time, I fell into financial difficulty, ending up living in a friend's car for 10 months. In checking the government site, the balance of my loan is $15,600 as of 8/2015 at 6.8%. My loan went into default 4/2015. Recently, I was able to find part time employment and with the help of my family and friends, have a home to live in. 

I just made age 62 this year and want to apply for early social security benefits, but was worried it would be taken (like a tax refund) to pay back my student loan. So that's when I started investigating how to start repaying that debt.  More specifically via the PAYE program.  I am thinking I set up a payment plan with the government and then apply for SS benefits.

QUESTION:  Can I get approved for PAYE even if I'm currently in default?  Or will I need to contact them and make one payment then switch to PAYE?

Using the calculator, my payments came out to be $0 as I'm not making enough as yet to be over the poverty line.

QUESTION: Are social security benefits needing to be included in my Adjusted Gross Income to calculate the monthly payment?  By what I read, that is a separate issue.

QUESTION:  What are my next steps?

Thank you!

TheCollegeInvestor

Answer: You can get on a income-based plan like PAYE if you go through a process called Student Loan Rehabilitation to get out of default. This will require you take certain steps, such as making some payments or consolidating your loan.

Here the process to rehabilitate your loan: https://studentaid.ed.gov/sa/repay-loans/default/get-out


Geeharry

Thank you. That link was very helpful.  During the Loan Rehabilitation period, will my Social Security benefit be in jeopardy of being taken to pay my loan or will having gotten on the rehab program Prevent that from happening?

TheCollegeInvestor

I believe you need to complete the full rehabilitation process first, but confirm with the Dept of Education.

Geeharry

Upon contacting the Federal Student Aid, the recording said my defaulted loan was serviced by a debt collector: GC Services.  Will this preclude me from rehabbing my loan and eventually get on the PAYE program?

I called a number on another website (forgetstudentloandebt[dot]com and they said they can do everything for me for about $696.  Based on what I've read here, I'm skeptical and now am thinking I probably can do all of this myself. Has anyone heard anything bad about this website run by a guy named Tom Gaffney?  In doing a web search, there is a Tom Gaffney involved in fraud, but I'm not sure if they are related.

Geeharry

In checking GC services, they have a very poor record on debt collection and are even in trouble with the FTC. What can I do?

TheCollegeInvestor

Yes, when you're in default your loan is transferred to a debt collector. But you can still rehabilitate your loan as long as you've never defaulted before.

Here are the steps: https://studentaid.ed.gov/sa/repay-loans/default/get-out

Here is the rehabilitation application: https://ifap.ed.gov/dpcletters/attachments/GEN1409OMB1845n0120RAP.pdf

Geeharry

Okay, so I take it I must contact this collection agency because they are the loan servicer and find out what my initial payment amount will be.  Then after I find that out and not satisfied, I can use the application form to obtain a second payment offer to choose from.

I have other questions as it relates to income. I drive with Uber and find my weekly income varies and is gross before other business expenses such as fuel, repairs, tires, insurance, required use of a smartphone, etc. How do I come up with estimates on that?  Is it the net income amount for this business?  I am not receiving any wages.

Are you able to supply me with a good company to take care of all of this paperwork, know all of the answers and do it for me for a reasonable price?  Maybe a list from which forum users have had good experience with?  Or should I pose that question to the group myself?  Thank you again.

TheCollegeInvestor

You should use your net income - which you need to keep track of. Uber will send you a 1099, but if you don't want to pay taxes on the full amount, you should be keeping track of your mileage. Check out this free tool to do it: https://thecollegeinvestor.com/18468/everlance-review/

We don't recommend using any service because the paperwork is very straightforward and don't believe that someone struggling with debt should spend $500 or more on it. Here is the application for rehabilitation: https://ifap.ed.gov/dpcletters/attachments/GEN1409OMB1845n0120RAP.pdf