Consolidate or Pay Up?

Rebecca has a student loan in default that is being handled by a collection agency. They want her to pay $20,000 now or consolidate it with $16,000 in collection fees. Are those her only options?

QUESTION: Rebecca in Pensacola has a student loan in default that is being handled by a collection agency. They want her to pay $20,000 now or consolidate it with Direct Loans with $16,000 in collection fees. Are those her only options?

ANSWER: There’s no way I’m going to consolidate and pay $16,000 worth of collection fees. They will eventually garnish you, but I think you can certainly work out a payment plan with them. They’re trying to bully you into paying something you don’t need to pay. You’re going to have to pay the student loans. You’re going to have to pay the interest. You may even have to pay some of the late charges, but $16,000 worth of collection fees is a bunch of crap.

I’m going to fight through, and I’m certainly not going to finance. Once you finance and roll that in, it’s a new loan. It becomes part of the principal of the loan, and you’re going to eat that stuff. The answer is C) none of the above. I can’t do $20,000 upfront, and I’m not going to do the other. And I’m not going to be blackmailed into it.

They’ll take your payments. They’ll cash the check. They may still come after you, but they’ll cash the check.

No, I’m not going to pay them $16,000. No, we’re not going to let you get all the way to court, and you’re not going to bully me. I think you’re going to have to roll up your sleeves and start sending them substantial amounts of money. You have not made this a priority for many, many, many years. Now, 10, 15, 20 years later after medical school, this is still lying there. And now you’re going to have to clean it up.