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 her 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. At first, she trashed these Sallie Mae envelopes without giving them much thought. When the mail started piling up, however, 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 balance due approached $12,000.
Receiving bills for paid-off debt
This happens more than you might think. One Redditor recently complained 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’s customer service.
“I called them up one Friday 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 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.”
How to handle ‘past due’ notices
Zombie debt refers to unpaid loans that linger for years, adversely affecting your finances without your being aware of it.
But what about a debt that’s been paid off and still comes back to bite you?
Double-check that your debt is dead
If you’re like McCullagh, you might have tossed out all your student loan paperwork once you became free of your college debt. Instead of helplessly rummaging through your closets, there are ways to find your transaction history online.
If you borrowed federal loans for college, visit the National Student Loan Data System (NSLDS). 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 NSLDS, contact your state’s higher education authority for assistance. You can find your state’s agency via the Department of Education.
For private loans, contact your original lender. If they’re unhelpful, resort again to your credit report. You might also ask your bank for statements showing past loan payments.
Request proof of your outstanding debt
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.
First, you’ll want to send a response assuring that your debt’s been repaid. In doing so, however, avoid sharing personal information in case you’re a target of 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.
Don’t ignore new bills for old student loans
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.
If your debt has been repaid, you’ll want to prove it to keep the lender, servicer or collections agency off your back.
If like McCullagh, however, 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 financials. 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 her outstanding balance.
You might think you left your student loan 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.”
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 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 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.50% APR (with Auto Pay) to 7.27% 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 April 17, 2019, 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 04/17/2019. 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 firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 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.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
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.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
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 2.49% effective March 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.50% – 7.27%1||Undergrad & Graduate|
|2.50% – 7.12%3||Undergrad & Graduate|
|2.81% – 8.79%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.55% – 7.12%5||Undergrad & Graduate|
|3.00% – 9.74%6||Undergrad & Graduate|