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Question By
mliubkin

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I just received a demand for payment letter from a very old collection company. What do I do???
Hello,
About 15 years ago, I had defaulted on a student load. It was reported as a collection and then dropped off over 7 years ago. Today, I just received a demand for payment letter from them. I'm not sure what to do. I want to contact them and make payment arrangements, but I'm afraid they'll re-age the debt and report it on my credit report as a new collections entry, impacting my credit score. If I don't contact them, I'm afraid they'll sue me because the original amount of the loan was $10,000. PLEASE HELP!!!

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Student loans are one of the only type of loans that can remain on your credit forever. Just because it is not there currently does not mean that the debt will go away. I it will remain in default status until the loan is paid in full and default loans can keep you from being able to get a mortgage loan in the future. You should check into a Student Loan Rehabilitation program and try to get the issue resolved before it is put back on your credit report as a default loan.

Reply by
mliubkin

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Thank you. I checked on loan  rehabilitation program options. However, this was a private student loan. From what I've read, loan rehabilitation programs are mainly designed for federal loans, and for private loans, the only option is to work with the original lender (not collections), and try to make payment arrangements. In some cases however, it can backfire, as the lenders can add high penalties on top of the loan and make it completely unpayable. Do you happen to know if it's true?

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Federal or Private?

If it is a private student loan, there are great articles on what to do and what private student loans can and cannot do.  Once the SOL in the state has passed and they fall off your credit report, there isn't much the private student loan can do.  They can continue to send you letters and try to collect the debt. Check the SOL on contracts in your state to see if it has passed.  Private loans are treated as any other debt, unlike federal student loans.  Federal student loans on the other hand, cannot be "written off"and you are responsible for the debt until paid, unless you get loan forgiveness (which is very difficult).

Reply by
mliubkin

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Thank you. What is SOL. This loan was a private Citibank student loan I took out to supplement financial aid, as I was only working part time while in school.

Reply by
mliubkin

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Double checked my records. This was a private CitiAssist loan. Also, checked statute of limitations in NY, where the loan was taken out and also in MA where I currently reside. Looks like 6 years for a written contract in both states. My loan was taken out between 1999 and 2001. I defaulted on it back in 2007, which is 9 years ago. Does this mean it's passed the statute of limitations? If so, do they still have the right to report it to the credit agencies or is it illegal? 

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