Americ McCullagh was so desperate to rid herself of more than $40,000 in student loan debt that she used her home’s equity to do it.
“I got rid of most or all my [files] about my student loans,” said McCullagh, who went to school for six years to get an occupational therapy degree. She remembered thinking: “Why would I need it? It’s over.”
Eleven years later, however, McCullagh’s lender started sending her notices about outstanding dues on apparent zombie student loan debt. At first, she trashed these Sallie Mae envelopes without giving them much thought. But when the mail started piling up, she unsealed one to receive an unfortunate surprise.
Sallie Mae claimed she had paid off all her debt — except for about $150. After more than a decade of interest had accrued and capitalized, her zombie student loan debt approached $12,000.
Zombie student loan debt refers to unpaid loans that linger for years, adversely affecting your finances without you being aware of it. It could still be lurking because:
- The loan was sold to another lender, and its account history was incomplete
- It was borrowed in your name — but you’re a victim of identity theft
- The debt’s statute of limitations was reset (in the case of private student loans), making it possible for creditors to renew collection attempts
- The debt wasn’t included as a discharge during a bankruptcy proceeding
Zombie student loan debt comes back to life more often than you might think. One Redditor complained in 2019 of receiving a bill 15 years after repaying his student loan debt. He resorted to mailing his lender a redacted copy of his credit report, which showed the debt had been repaid in 2003.
In McCullagh’s case, it took eight hours, spanning a dozen phone calls to Sallie Mae customer service.
“I called them up one Friday [when] I was off from work,” she said. “I was crying, and people were hanging up on me. … On the 12th phone call, I got this lady who took pity on me.”
They figured out that McCullagh’s zombie student loan debt wasn’t completely paid off because of a timing snafu. Her bank paid off her loans a few days after Sallie Mae had imposed that $150 of interest.
“Of course I would have paid it,” she said, “but I didn’t know because they never told me.”
What can you do about haunting zombie student loan debt? Follow these steps.
Double-check that the zombie debt is, in fact, yours
If you’re like McCullagh, you might have tossed out all your student loan records once you became free of your college debt. Instead of helplessly rummaging through your closets, there are ways to find your transaction history online.
|For federal loans||Private loans|
|● Visit the Federal Student Aid (FSA) website. You’ll be able to view not only your balance, but also your loan servicer. If the company contacting you doesn’t match, it could be a collection agency working on behalf of the servicer, or it could be a scam.
● If you’re unable to find your loans via the FSA, contact your state’s higher education authority for assistance. You can find your state’s agency via the Department of Education.
|● Contact your original lender.
● Check your credit report, which should show your debt’s status. You can view your credit report for free once per year at AnnualCreditReport.com. (The three major credit bureaus have also made free weekly reports available through April 2021 because of the coronavirus pandemic-affected economy.)
● You might also ask your bank for statements showing past loan payments.
If after checking these sources, you can’t confirm that the reported debt belongs to you:
- Don’t make a payment — this could reset the statute of limitations.
- Instead, contact the lender again to seek a detailed history of the debt.
- Gather your old student loan bills and other paperwork, anything that proves the debt isn’t yours.
- Dispute the debt with the credit bureaus to ensure it’s removed from your credit report and doesn’t affect your credit score.
Request proof of your outstanding debt
If the debt is in your name, but you’re not sure about the balance owed, it’s time to reach out. McCullagh remembered Sallie Mae as her lender, so she simply dialed its customer service line.
But if you received correspondence from a lender, servicer or collections agency that you don’t recognize, you might be unsure of your next steps to kill that zombie student loan debt.
First, you’ll want to send a response assuring the creditor that your debt has been repaid. In doing so, however, avoid sharing personal information in case you’re a target of student loan scammers.
In the letter, request the loan’s complete history, plus a written explanation for your outstanding balance. And, of course, keep the conversation in writing, so that you have a formal record. Only then can you be sure that your zombie student loan debt is legitimate.
McCullagh thought the Sallie Mae mail she received a decade after zeroing her debt contained advertisements, not something to unseal and study. Thankfully, however, she wised up to see why her lender kept contacting her.
If you’re in a similar situation, don’t make the mistake of ignoring past-due notices, even if you believe you’re no longer in the red. New bills for old loans should spring you into action.
If your zombie student loans have been repaid, you’ll want to prove it to keep the lender, servicer or collections agency off your back — and your debt out of collections.
If, like McCullagh, you unwittingly have a balance due on your loans, you’ll want to become aware of that fact as soon as possible — before it harms your financial situation. If Sallie Mae had reported McCullagh’s seemingly delinquent loan, for example, her credit report would have been severely dinged.
Because she called and explained her side of the story, Sallie Mae finally waived the outstanding balance on her zombie student loan debt.
You might think you’ve left your debt in the dust. But to secure your financial future, McCullagh recommended asking for a debt payoff letter — and keeping it safely stored.
“Looking back, I never got that letter or receipt,” she said. “That would have stopped all of the drama.”
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.18% effective July 10, 2020.