In 1982 my wife took out a Stafford Subsidized. In 1989 she took out a National Direct Student Loan. Some attempts to collect were made in the 80s and 90s, when she was not in a position to pay them back. In the late nineties, an attorney who was a friend of the family told her that the loans were more than seven years old and could not be collected. He advised her to disregard any mailings that had to do with these loans. Attempts to collect on these loans stopped shortly after that, leading her to believe that the attorney had been correct.

Yesterday we received a notice from a debt collector stating that she owes almost ten thousand dollars. This was a surprise, since she had heard nothing about these loans for many years. I did some checking and came to the conclusion that the attorney was wrong, and that because these were federal loans there is no statute of limitations.

Here’s the situation today. Though my wife is a student and I am not working, we have savings from which we can pay off these loans, and we are eager to do so and put this behind us. HOWEVER, I called the Debt Collection Service of the Department of Education to check on the total amount owed. They informed me that the principal and interest amount to about $8000, and that the rest of the money on the bill (almost $2000) was the fee for the collection agency.

We owe money to the Department of Education, and we want to pay that money back. But I’m not thrilled about paying some collection agency an almost $2000 fee simply for sending us a reminder.

It seemed to me from another post on this forum that the owner of the debt could, at their discretion, accept payment directly from the debtor instead of going through the collection agency. This seemed like a good solution – it saves us $2000, the government gets the full amount of the debt, and the collection agency doesn’t reap a ridiculously large reward for looking up our address and sending us a bill. So I gave this a shot: assuming that the Deptartment of Education still owned the debt, I asked someone there whether sending them a check for the $8000 (i.e., all principal plus interest) would cancel this debt, and they said that no, until we paid whatever fees the collection agency was asking for, the debt would remain. They said that we could try to negotiate with the collection agency, but I have a feeling that the agency won’t be amenable to giving up their fee.

I understand paying back the interest and principal, because my wife must have signed an agreement promising to do this. But it seems strange that a collection agency should be able to tack on a $2000 fee. Where did that number come from? What if they had wanted to add a $5000 dollar fee, or a $10,000 fee? How is it that this fee can simply be added to the debt?

In any case, my main question is twofold:

1. Is there anything we can do that would result in us paying only the $8000 principal and interest, and not the $2000 fee to the collection agency?

2. What concrete steps do you advise taking in this situation? The debt collector’s letter stated that we had thirty days to dispute the validity, in which case they would mail us “verification of the debt.” I think it makes sense to ask them to send verification, as well as a breakdown of the $10,000 figure they cited. What do you think – good move? Bad move? Irrelevant move?

Many thanks in advance for any information that will take us closer to (1) paying what we owe, and (2) minimizing what seem to me to be excessive fees.

-Fjfjdv in New Hampshire