The lender's mistake
Joel Winston borrowed $50,000 to pay for his undergrad education at the University of Michigan in Ann Arbor. Graduating in 2003, Winston made on-time monthly payments until one night in 2006 when he received a call from a credit recovery company stating that his private loan was in default.
"I called and said 'Do you have a mistake here?' and they were like 'No. We don't. You need to figure out how to pay this, and if you don't, we can garnish your wages and take your tax returns,'" Winston recalls.
If there's a mistake, the borrower should find out what payments the lender is saying it didn't receive, then submit proof that those payments were made, says Mayotte.
If the conflict can't be resolved, file a claim with the Department of Education's ombudsman for federal loan issues or the Consumer Financial Protection Bureau's ombudsman for private loan issues.
After two internal investigations, Winston's lender corrected its mistake. Winston filed a lawsuit over violations to the Fair Debt Collections Practices Act, which regulates how collections companies may contact you regarding the debt. He reached a legal settlement that he applied to his loan balance.
"You have to keep meticulous records. You have to keep all of your files," Winston says. "If you feel that something has happened, be patient. Ask nicely. Be polite. Do not get upset with the people over the phone because those are the only people right now that can help you."