Dear Dr. Don,
I recently applied for a college loan to go back to school. I found out that a previous student loan that I had taken out is in default. I attended a private college, but withdrew after a week after I realized that I wouldn't be happy in that line of work.
I never attended after that first week and assumed that I would only be liable for that first semester's charges. I was told that the school not only charged me for the entire amount of the student loan, but that I had graduated. Do I have any recourse or should I just pay the back the entire amount?
-- Curtis Collegian
I'm not sure how the money will all shake out, but you certainly have a reason to talk to the fraud prevention hotline in the Office of Inspector General at the U.S. Department of Education.
I'd agree with your sentiment that you shouldn't have to pay for anything past the first semester's charges, but there's no doubt you were slapped with a host of late fees and accumulated interest charges on the defaulted student loan.
What I can't figure out is how you were clueless that you were in default on the student loan. If your payments were deferred while you were a registered student, and the school kept you enrolled, that could explain part of it.
Again, I'm not sure how the fraud issue will end up, but you do have the ability to restore your eligibility to receive additional federally funded financial aid. From the "Going Back to School" page on the government's Federal Student Aid Collections website, your options are:
- Repay or satisfy the student loan in full.
- Make six agreed-upon monthly payments over a six-month period. Your payment amount must be approved in advance by the U.S. Department of Education. Every qualifying payment must be timely (received before the due date) and you cannot make all six payments as a single lump-sum payment. Once your eligibility to receive additional federal financial aid has been restored after making six consecutive monthly payments, you must continue to make timely monthly payments to maintain your eligibility or else it will be permanently lost until the debt is resolved entirely. In other words, you may qualify for this program only once.
- Consolidate your student loan through the Federal Family Education Loan Program for loan consolidation or the William D. Ford Federal Direct Loan Program.
- Rehabilitate your loan through the Federal Student Aid Collections' loan rehabilitation program.
Because defaulted student loans have no statute of limitations for enforceability, you would remain ineligible for additional federal financial aid until you complete one of the options mentioned above.
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