What do you think about this?

[thesauce]

I'm actually posting this for a very close friend. And to be honest, I don't know if the discussion belongs here, but it is about money.

My friend has always had a very shaky (to put it extremely mildly) relationship with her parents. They cosigned on one of her student loans (about $20k). She had a fight with her parents a couple months ago and, in retaliation, they paid off the loan and sent it to the collection agency. Now she's getting phone calls and letters from collections about paying the bill and the collection agency is charging her 12% interest (as opposed to <5% that the student loan was for). She had intended to pay off the loan over 25yrs, not immediately in one lump sum. She's very frustrated about this and doesn't know what to do.

Anyway, just wanted to get some opinions on best course of action or whether they (her parents) are legally entitled to money.

To clarify:

1. My friend applied for a student loan for $20k+ with her mom as cosigner 5 years ago
2. This year, while in graduate school, with the loan in in-school deferment, her mother called Sallie Mae and paid off the entire $20k+ loan
3. After paying off the loan, her mother then contacted a collection agency and said that she was owed this money
4. The collection agency is contacting her with letters and phone calls to pay the bill in full in a lump sum and is charging 12% interest and additional fees on top of that

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[bowzer]

I'm actually posting this for a very close friend. And to be honest, I don't know if the discussion belongs here, but it is about money.

My friend has always had a very shaky (to put it extremely mildly) relationship with her parents. They cosigned on one of her student loans (about $20k). She had a fight with her parents a couple months ago and, in retaliation, they paid off the loan and sent it to the collection agency. Now she's getting phone calls and letters from collections about paying the bill and the collection agency is charging her 12% interest (as opposed to <5% that the student loan was for). She had intended to pay off the loan over 25yrs, not immediately in one lump sum. She's very frustrated about this and doesn't know what to do.

Anyway, just wanted to get some opinions on best course of action or whether they (her parents) are legally entitled to money.

sorry, but i lol'ed when i read this. 20k over 25 years? God help us all

 

[thesauce]

sorry, but i lol'ed when i read this. 20k over 25 years? God help us all

Ouch man, c'mon. It's one of her many loans.

 

[Bobblehead]

What does paid off the loan mean? Did her parents stopped making payments on the loan, she defaulted and the loan was subsequently sold by the lender to a collection agency? What stage of training is this friend in, medical school, residency, etc.

What do you mean by were her parents legally entitled to any money? Did her parents take money out of her student loan payment? Where is the paperwork for the loan being sent, to her parents or to her?

Your friend would be better served getting her own advice directly on a board better suited for this purpose such as the Motley Fool, Creditboards or even Fatwallet finance where she can answer her own questions rather than being served through an intermediary.

 

[plauto]

you guys better get the story straight. If the parents paid off the loan then there should be nobody calling to ask for money, as paying off means that the loans were paid back. If they stopped paying the loan and they were cosigners, guess what, they're getting the calls too. If there were no cosigners, then your friend needs to get in touch with the loan agency and see how to fix the situation very quickly (which I'd do no matter what, since it's her name on the loans). Depending on what kind of loans they are, there might be options.

 

[lord_jeebus]

I am very confused about how a cosigner could transfer a loan from a student loan company to a collections agency. My best guess is that they paid the loan and then told the collections agency that their daughter owes them the money and that arbitrary rate of interest?

If that's what really happened, I imagine the "debt" owed is not real (as in the daughter did not agree to it) and the situation could be resolved following consultation with a lawyer and the threat of legal action.

Alternatively, if the "debt" is somehow real, it could probably be discharged via bankruptcy as it is no longer a student loan.

 

[thesauce]

I am very confused about how a cosigner could transfer a loan from a student loan company to a collections agency. My best guess is that they paid the loan and then told the collections agency that their daughter owes them the money and that arbitrary rate of interest?

This is what happened. To clarify:

1. My friend applied for a student loan for $20k+ with her mom as cosigner 5 years ago
2. This year, while in graduate school, with the loan in in-school deferment, her mother called Sallie Mae and paid off the entire $20k+ loan
3. After paying off the loan, her mother then contacted a collection agency and said that she was owed this money
4. The collection agency is contacting her with letters and phone calls to pay the bill in full in a lump sum and is charging 12% interest and additional fees on top of that

 

[thesauce]

What does paid off the loan mean? Did her parents stopped making payments on the loan, she defaulted and the loan was subsequently sold by the lender to a collection agency? What stage of training is this friend in, medical school, residency, etc.

Her mother paid off the loan in full and then reported the debt owed to a collection agency. She is a graduate student.

What do you mean by were her parents legally entitled to any money? Did her parents take money out of her student loan payment? Where is the paperwork for the loan being sent, to her parents or to her?

Admittedly, I was very confusing about this. I'm trying to figure out how/why the collection agency is seeking money from her without any evidence that she owes debt. What I meant was: can a cosigner pay off a loan and then (legally) demand payment from the borrower? Both parties have a copy of the original promissory note to Sallie Mae, but they have no agreement with each other.

 

[thesauce]

you guys better get the story straight. If the parents paid off the loan then there should be nobody calling to ask for money, as paying off means that the loans were paid back. If they stopped paying the loan and they were cosigners, guess what, they're getting the calls too. If there were no cosigners, then your friend needs to get in touch with the loan agency and see how to fix the situation very quickly (which I'd do no matter what, since it's her name on the loans). Depending on what kind of loans they are, there might be options.

Thank you for your response. Please read post #7 to better understand the situation. In short, her mother paid off the loan in one lump sum while it was still in in-school deferment. Then her mother reported the debt to a collection agency and said that it was owed to her. The original loan agency, Sallie Mae, is no longer involved since the original student loan has been paid off.

 

[lord_jeebus]

I think that, depending on your friend's degree of hate for her parents, she should consider filing a criminal complaint against them - just as she would if some random crook tried to make money from her this way.

I think the first step, in any event, is to retain a lawyer. If she is still a student, she could see if her school offers free/cheap legal advising.

The good news is that the lawyer will end up being considerably cheaper than the loan that she's not going to have to pay off.

 

[progter]

her mother could not do this

retain a lawyer and sue

 

[Bobblehead]

Stop posting things on the internet.

Get a lawyer. If your friend is a grad student call up the affiliated law school and ask for recommendations for lawyers dealing with debt collection.

Do not under any circumstances discuss things without consulting with a lawyer first.

The FTC has stated that student loans are covered under the FDCPA and that 3rd party debt collectors should be bound by its regulations. This means that following written notification by your friend, best sent as a certified, return receipt requested, letter to cease all communication and provide written validation of the debt the debt collector must comply or face possible financial penalties.

At this point, if the debt collector persists the lawyer will be handy. The lawyer will also be handy to sort out if there was any additional type of promisory note between your friend and her parents that would establish some type of repayment.

Again, you are best served letting this thread die now by not responding further and strongly suggesting your friend retain a lawyer.

 

[blanche]

I'm still very, very confused.

I thought the whole way debt collectors 'worked' was that they bought off delinquent debts (pretty much when a business, credit card, etc has 'given up' on collecting it..) They often purchase the debt for less than the amount owed (it, $10 K instead of $20 K), but will now turn around and charge interest and fees through the roof to the person who actually owes the debt. They may get $30, 50, or even 80K after all is said and done. Or they may get nothing at all if the person owing the $$$ never pays.

I have no idea how your friend's parent would be able to do this as a cosigner. If they really did, it means they 'sold' the debt and collected money on it (else is paying $$ to the debt collector....which doesn't make financial sense..)