Dealing with collection agencies…
Q. I pay my collection agency so much money on student loan interest every year. Why can't I get that student loan interest tax credit?
A. You can get it! If your collection agency isn't giving you an annual statement of interest payments, tell an agency supervisor that you need this for your taxes. It's good to have your records of payment in any case.
You can see more details in this Debt 101 article: How to Get Your Student Loan Tax Credit When You're in Default
Q. My loan just got sent to a collection agency. What do I do now?
A. Contact the collection agency to explain your situation and set up a repayment plan. If you can show them that you really are broke, even a small payment should keep things under control, even $25 month – as long as you pay on a regular basis. Essentially, you're buying time.
Trying to hide from collectors makes them more aggressive. Try to set a reasonable time for them to call you and if you miss their call, call them yourself.
Q. I can't pay as fast as the collection agency wants. Now they keep calling and they're getting more verbally abusive.
A. Legally, they must call at reasonable hours and they're not allowed to be abusive. Try to stay calm, because the insults are just a tactic. If they put you down, they're probably doing the same to their other clients. It's really not personal to them.
To put a stop to any abuse, document the details with names and dates. Tell them you will now report this to your original lender, and to financial authorities if necessary. If they don't back off, do report them. Some people tape a sample of these abusive calls to prove their case.
Q. The collection agency says I owe more than I thought. But my loans were so long ago, I don't know what I've paid. What can I do?
A. For one thing, start a file folder and keep track of everything from now on in.
You'll also need to ask the collection agency for records. But your original loan lender may also still have a copy of your early records, especially if your lender was government (all types of loans except the risk-shared type).
Often collection agents demand payment without bothering to give you old records of payments owed to help you track what you paid. If you have trouble getting those records, explain that you need full records in order to work out your payment plan.
If the agent can't understand that, try a supervisor. And if that fails, tell your original lender what's going on.
Q. The collection agent threatened to have me sued if I don't pay my whole student loan right now. What can I do? I can't get that kind of money!
A. Sometimes, collection agents threaten court action just to scare you into paying. They might even send you letters warning of pending warrants or court orders. Since you can't pay your whole loan right now, you should evaluate your situation to see how likely this threat is to be real. You should also seek the advice of a credit or debt specialist.
The main issue will be whether you've paid to the best of your ability. But in part, your vulnerability also depends on who lent the student loan you have. Your highest risk may be with a Canada student loan (and one that's government-owned, not risk-shared).
Collection agencies have the grounds to sue on a Canada student loan if they can document that they took all steps to make a payment arrangement and you wouldn't co-operate. But they would need to meet other requirements, also.
Q. I don't know what they've got on me, so what are the other requirements?
A. Some requirements are easy for you to judge. For example, the agency is unlikely to sue you if you're out of work, you haven't been on their books for more than 6 months, or if you've made a payment during the last 6 months. Give them another payment and make sure you keep a record or receipt.
Q. Based on that, they might have a case to sue. But I can't make a payment right now.
A. It's best to make a payment as soon as you can. While they may just be trying to scare you, you don't want to seriously risk having a collections agency pursue your defaulted student loan through the courts.
For ideas on finding ways to make a payment, see other articles on our help-site, such as When You Can't Pay: An Emergency Guide.
Threats are often only that, but if they did sue and win their case, you could be ordered to pay even more money than you owe now. The full amount of a judgment debt can be principal, interest, and legal costs.
If the case did go to court, you would be in a much stronger position if you could show reasonable attempts to communicate and to pay what you can.
Talk this over with a specialist in debt, credit or bankruptcy.