Defaulted Student Loans Cost You Big Bucks

Did you know upon signing your initial promissory note you are taking responsibility to repay your student loans back. In addition you are also agreeing to pay any collection costs on your debt should your loan be defaulted. These collections costs can be as much as 24% and may be added on to the balance of your loan. Collection costs are recalculated annually and the percentage rate is subject to change depending on variations with administrative costs, or whether your account is assigned to a collections agency or an attorney. Recalculated costs can potentially cause either an increase or a decrease in your total balance.

Collection costs are calculated as a percentage of the total principal and accrued interest balance. Once a repayment arrangement is in place and the first payment is made within the first 60 days of the default claim date, you will not be accountable for collection costs once the account remains current.

If your student loans are in default we can help. Visit us online at www.teamfmi.com  and take action.  Also on the lower right hand side of this blog you will see a Contact Tab click on that tab and ask me a question or schedule a 30 minute free no obligation consultation.

Thank You For Reading My Blog

Financial Management Institute Inc
Kenneth Grayer CEO/President
Email: clientservices@teamfmi.com

The Student Loans Collections Process

Student loan collections don’t only involve phone calls from the U.S. Department of Education's account management department; collections agencies contracted by the Department Of Education notify you of your defaulted student loan debt.  Defaulting on your student loans causes long term consequences, especially on federal student loans. The penalties are far more severe than if you merely stop paying your credit card bills. 

Many non-students feel that if their taxes are being taken then the loan is being taken care of.  So allow me to put this into perspective for you-offsetting your tax refunds happens once a year so if there is a balance after the offset fees and penalties are added to that balance also.  In addition to an offset non-student may also face administrative wage garnishment (AWG).

What Can I Do?

Loan rehabilitation is a great option for getting your loans out of default if you are employed and can demonstrate that you have the financial ability to repay the loans back.

What’s In It For Me?

If you choose to rehabilitate your loan, at the end of your rehabilitation (9 months) you are eligible for all of your borrower rights such as deferment and forbearance benefits, stops possible administrative wage garnishment, stops the possible IRS offset, credit report is updated and you are now eligible to return back to school. Individuals that say collection agencies must stop calling you is not correct, if you default on your loan rehabilitation the collection agencies will call you (possibly) or they will pursue the governments’ legal rights. (I know this because I was a former student loan collector)

Your Rights During The Collection Process

The good news is that the collection agencies that are awarded contracts from the Department of Education still have to follow federal law—The FDCPA protects consumers against unfair, abusive, and harassing debt collectors.

Bottom line: you have options and you have rights 

Student loan debt can be overwhelming, but depending on the type of loans, and the status of your loans, you should have more than one repayment option. If you need help understanding and choosing a repayment plan or if your student loans are in collections, please contact us we can help you. 

In the right corner there is a pop up contact request that allows you to ask a question or schedule a free 30 minute consultation.

Financial Management Institute Inc
http://www.teamfmi.com
Email: clientservices@teamfmi.com

America's Average Student Graduates With A Debt Load Between $23,000 and $27,000

America's average student graduates with a debt load between $23,000 and $27,000. In 2010, 62 percent of jobs required a degree beyond high school, but that's expected to increase to 75 percent by 2020. What does this possibly mean for collections agencies?  MORE DEFAULTED CONTRACTS!!! Both government and guaranty agencies often hire private collection agencies to collect defaulted student loans.  

When students complete college most if not all colleges request that students go through an exit interview.  It has been our experience with "some" clients that they were not educated on preventative default measures, or educated on the consequences if your loan goes into default, or about the variety of programs available for students and non students if default does become a reality.  Many students after graduation do actually lose track of their student loans..due to relocation, marriage, focusing on the job market, unemployment issues. 

Private collection agencies are delegated the responsibility for determining the size of a reasonable and affordable payment plan.  In addition, these collection agencies help locate borrowers, determine if students are eligible for possible administrative wage garnishments and tax refund intercepts.  The complexity of student loans often leads to borrower confusion when a collection agency makes contact with the borrower to inform them that there student loans are in default.  Which leads to frustration, anger, embarrassment and eventually some borrowers filing complaints.

According to the Department’s 2009 Private Collection Agency Manual, each collection agency is required to have at least two people designated to receive and manage complaints.  If you are having trouble dealing with a collection agency, ask for the designated “complaint” person.  You should let the Department of Education know if their contractors are not complying with these requirements. 

The Department of Education deals with hundreds of thousands of borrower complaints about collection agencies and not all complaints will be handled expeditiously. And with all do respect not all complaints are legitimate.   

If you are in need of student loan default assistance please contact Financial Management Institute, Inc. at www.teamfmi.com.  We offer our clients a 100 percent money back guarantee and a FREE online platform were students and non-students can take advantage of financial education lesson plans, our student loan resource center, downloadable federal forms, brochures, guides and much more. 

The Man Behind FMI

Spontaneous Idealists like me are creative, lively and open-minded people. I am humorous and dispose of a contagious zest for life. My enthusiasm and sparkling energy inspires others and sweeps them along. I enjoy being together with other people and often have an uncanny intuition for their motivations and potential. Spontaneous Idealists are masters of communication and very amusing and gifted entertainers. Fun and variety are guaranteed when I am around. However, I may be sometimes somewhat too impulsive in dealing with others and can hurt people without really meaning to do so, due to my direct and sometimes critical nature.

I am a keen and alert observer; I miss nothing which is going on around me. In extreme cases, I tend to be oversensitive and exaggeratedly alert and I am inwardly always ready to jump. Life for me is an exciting drama full of emotionality. However, I quickly become bored when things repeat themselves and too much detailed work and care is required. My creativity, imaginativeness and originality become most noticeable when developing new projects and ideas - I then leave the meticulous implementation of the whole to others. On the whole, Spontaneous Idealists attach great value to their inner and outward independence and do not like accepting a subordinate role. I therefore have problems with hierarchies and authorities.

As a Spontaneous Idealist I am one of the extroverted personality types. I enjoy working in a colorfully diverse group of people who interest and inspire you. Working in a “secluded room” is not my thing. My sense for the motivation of others is almost eerie. I constantly observe that which happens around me and have no problems noticing all sorts of things simultaneously or communicating with several people at the same time.

My enthusiasm is contagious to others and that is why my colleagues and friends all appreciate me as an important member of their team. My articulateness and sensitive ear for nuances in conversations with others obviously play a role. For me, this team-oriented environment is very important because I need to receive positive feedback and recognition like other people need air to breathe. It would be practically impossible for me to contribute everything I need to maintain my high ideals, by myself.

Variety, challenges and fun are important ingredients in my area of responsibility. I appreciate receiving new stimulation, meeting new people, and continuously collecting unique experiences. However, too much routine, too much detail work and the necessity to stick with one project for a very long time is not my thing. My strength are creative problem solutions, discovering new ways and opportunities, the conceptualization of new ideas on one hand, but not so much their concrete implementation on the other. Ideally, I have a staff of capable colleagues that takes over my concepts and runs with them.

This Is Me!! ….

Bankruptcy Law Firms And Collections Agencies

I really wanted to spend some time today talking about Chapter 13 Bankruptcy:  This form of bankruptcy allows a person to consolidate the debt while making convenient monthly payments to a trustee. A payment plan is proposed which repays the debt over a three to five year period.  The amount of the monthly payment and the length of the repayment plan is based upon the following factors:

• Monthly income of the person
• Monthly expenses of the person
• Amount and nature of the debt

Note: The proposed payment plan may increase to an amount that is not affordable to the consumer

 The most common uses of Chapter 13 involve:

• Repayment of mortgage arrears (back amounts owed) home
• Restructuring of auto loans to save a vehicle
• Assistance with Parking Tickets
• Student Loans
• IRS Repayment

Secured debts are paid 100% on the dollar, while unsecured debts may be paid as little as 10% on the dollar. A person receives a discharge under Chapter 13 once the payment plan is completed. Discharge is “NOT” to be confused with “Dismissed”

Note:  A Discharge means that you have complete your Chapter 13 or Chapter 7 Bankruptcy,A Dismissal means that you have “NOT” completed your Bankruptcy.

Some law firms do not charge all of their fees upfront; the only fee that may be required is the court cost. Once you agree to the services to be performed, the fees of the law firm and sign the contract, the firm then request that the fees are included into the proposed plan, the fees are approved and awarded by the judge.  

Example:

Attorney Fees: $3,500.00
Retainer Fee $350.00 (Varies)
Judge Awarded Fees $3,150.00 (Remaining Balance This Is The Amount Submitted To The Trustee, Actually The Consumers New Additional Debt)
Court Cost of $350.00 (Varies)
Month Payment: $500.00 Per Month (Example) 
(The Order of Payment)
a. Trustee Payment (6-10 Percent of the monthly trustee payment)
b. Law firm Fees
c. Creditors

  

Some consumers who have large amounts of debt are looking for a way out and aren't concerned with the details of the law firms contract they just signed and agreed to.  There concern is saving their home and vehicle.   The success rate of consumers completing a Chapter – 13 bankruptcy is very low.   A lot can happen during those 3-5 years;  consumers could lose their jobs, maybe hours were cut, something effects the income and consumers cannot afford to make the planned monthly payment and now your bankruptcy is dismissed (For Failure To Make The Planned Payments).  

When a consumer receives a dismissal notice creditors are privileged to that information.  Some law firms consumers trust to represent them are now amongst the list of creditors they owe money to.  In Attorney client contracts this is called (Disclosure of Compensation for Attorney Debtor Fees)

Some law firms will attempt to hold consumers contractually obligated to pay what ever amount is remaining in attorney fees and making lots of money collecting on their own dismissed bankruptcy fillings.  If a law firms hires just one highly skilled collector, that individual can collect upwards of $10-$15K in cash every month now multiply that by 4 - 5 debt collectors each averaging $10-$15K. and the firm is paying out 10-15 percent in commission. Not to mention-the collector getting the debtor to refile another case is not uncommon.  

   

Is it possible that law firms could start to look at debt collectors as ....paralegals, customer service representatives, accounts receivables management,sales and case builders, etc.... 
The Hybrid Debt Collector

Thank You For Reading Our Blog
Financial Management Institute Inc
Kenneth Grayer CEO/President

kgrayer@teamfmi.com

Selecting A Debt Management Company

7 Key Rules every Consumer Should Know

FMI knows that individuals often feel overwhelmed when they come to a point in life where they must ask for help from a credit counselor or debt management specialist. Without some specific guidelines to assist them along the way, many may make poor decisions and, in the long run, only compound their original financial problems. But what is debt management, and what does it really involve?

Debt Management, defined simply, is a process by which debt is eased and eventually reduced through the managing of consumer assets and direct negotiation with creditors. Debt management is usually offered by qualified debt "counselors" or a certified debt management company as is the case with FMI. These debt management companies use what are called "debt management plans (DMPs)" by which consumers deposit set funds each month into specific accounts that are then used by the debt management company to pay off consumer credit card bills, student loans, medical bills or any other form of unsecured debt.

Choosing a debt management provider is not something that should be taken lightly. What do you look for when choosing a credit counselor or debt management firm? There are dozens of factors to consider, but these 7 key rules to choosing a credit/debt management firm can make the process less stressful and may get you much closer to financial comfort faster and easier then you ever thought possible.

1. Get a Referral - Ask someone who has been in a similar situation. Take time to ask questions, to determine if they had a good experience with a particular firm or a bad experience. Getting information directly from another consumer who has used credit counseling or debt management in the past is an excellent way to learn before you agree to pay for services. In addition, a reputable company should be willing to provide examples of good results, without revealing another person's private information.
2. National Accreditation - While no specific national or state accreditation will guarantee success, there are organizations in the U.S. with the soul purpose of promoting high standards and ethical practices in the consumer credit industry. The American Association of Debt Management Organizations are one of the most prominent in this industry. Members of this organization specialize in credit counseling, debt management plans, budget/finance industry education and much more.
3. Better Business Bureau Membership - Contact the Better Business Bureau in your city or region and ask for information about the credit counselor or debt management firm you are considering. You may also want to talk to someone in the State's Attorney or Attorney General's office to see if the company has been the subject of any regulatory action. Finally, if the firm in question has a website, check to ensure it's a member of the www.bbbonline.org online arm of the BBB and has been awarded its coveted "Reliability Program Online Seal" View our BBB online certification here.
4. For Profit vs. Non-Profit Experience - Many consumers have a misunderstanding about Not-For-Profit debt management companies vs. For-Profit companies. They both offer concessions for the consumer whereas some states require non-profit status before the company can do business in the state. Credit card companies fund most Not-For-Profit credit counseling companies with Grants and Fairshare deductions as a way for them to recover money from consumers who are currently not making their payments. The biggest difference is that a Not-For-Profit does not pay taxes whereas a For Profit does. Study the company carefully to see if it uses "non-profit" status simply as a marketing tool. In addition, you should select a firm that has been in business for a number of years, such as FMI, so that they have a track record you can see.
5. A Written Plan - A reputable credit counseling firm or debt management company will take time to review your situation, help you with budgeting and money management, and put your individual plan in writing. This personalized plan should include details on how creditors will be paid, as well as realistic goals for returning you to full financial health. Some firms even offer a free debt comparison quote which is an excellent way to see how much money you can save, what your new interest rate may be and how long it will take you to get debt free on your debt consolidation program right out of the gate. Unrealistic promises should not be part of the plan. For example, a debt management or credit-counseling firm does not have the authority to change your credit report nor should it ever imply it has done so in the past.

Before taking these above few key steps toward resolving credit or debt troubles, look closely at your current budget to determine if you can pay a bit more than the minimum on your debt. If so, you may be able to rebuild your credit or handle your debt situation privately without the assistance of an outside counselor. If this is not possible, it may be time to call in professional help.

Coming face-to-face with financial trouble may seem to be more than you can handle, at first blush. Fortunately, there are many reputable credit counselors and debt management companies out there who can help get you started again in the right direction. Following these 7 simple guidelines when choosing a firm will go a long way in ensuring you final choice is also the best choice for your current financial circumstances.

Thanks for visiting FMI today. Please contact us today for more information on our programs. Take control of your finances today, we can help!

Part-1 Student Loan

Hello everyone there is major concerns regarding our student loan crisis so I felt compelled to put this small post together for you. This is part-one of a series of post that I will be providing so please share this information with others who may be in default.

When repaying a Federally Consolidated Loan, you may choose from multiple repayment plans such as Graduated, Extended and Income-Based with various term selections.

The consequences for defaulting on student loans is devastating after 9 months of non-payment such as-immediate increase in the interest rate of your student loans up to 18.5% in addition to fees added by collections agencies-Immediate loss of your Title IV Financial Aid benefits-Negative reporting to the three credit reporting agencies-Withholding of your federal income tax return by the IRS to repay the defaulted student loans-Administrative Wage Garnishment of up to 25% of your paycheck and this is in addition to the IRS taking your tax returns every year. Getting out of default can take 4-8 weeks or even 9 months depending on what methods use.  

An Administrative Wage Garnishment (AWG) is an action taken by the guarantor of your Federal student loan to recover payment on your defaulted student loan or loans by ordering your employer take up to 15-25% of your wages per pay period. Your employer cannot ignore this order or they face possible fines for every non-compliance incident of the order.

There are several options. One is settling of your loan or loans with a full repayment of the loan or loans. The settlement amount will be equal to no less than 95% of the payoff amount. Your outstanding loans can also be paid off through a Federal Loan Consolidation based on certain lenders and criteria. You may also need to work out satisfactory repayments with your lender/lenders to get the loan out of garnishment status. Unlike credit cards or any other type of private lender debt, Federal student loans cannot be included in a bankruptcy.

Unfortunately, student loans cannot be discharged because you feel your institution provided a poor education or had unqualified instructors or inadequate equipment. The U.S. Department of Education does not endorse the school's educational programs or guarantee that the school will deliver the services for which a student contracted. Therefore, this discharge cannot be granted if the school did not provide job placement or other services that it promised, or if you were not able to find a job in your field of study.

Part- Two of this series will be released 3/31/2012
Financial Management Institute, Inc
Kenneth Grayer CEO & President
kgrayer@teamfmi.com